Initiate long positions above the 28,600-pt level. Last night, the E-mini Dow ended higher to form a long white candle. It surged 428 pts to close at 28,789 pts, off its low of 28,287 pts. As the index posted a second consecutive white candle and recouped most of the losses from 31 Jan’s long black candle, this indicates that market sentiment is turning positive. Coupled with the E-mini Dow climbing above the 10-day SMA line, this has improved the positive sentiment. Meanwhile, yesterday’s closing has also triggered our trailing-stop, which we had previously recommended that investors set at the 28,573-pt threshold.

Based on the daily chart, the near-term support level is seen at 28,600 pts, set near the midpoint of 4 Feb’s long white candle. This is followed by 28,287 pts, ie 4 Feb’s low. If the price breaks down, the crucial support is anticipated at 28,105 pts, ie the previous low of 31 Jan. To the upside, the near-term resistance level is situated at the 29,000-pt psychological mark. This is followed by the 29,362-pt record high.

Hence, we advise traders to initiate long positions above the 28,600-pt level. A stop-loss set below the 28,105-pt threshold is advisable in order to minimise the risk per trade.

Source: RHB Securities Research - 5 Feb 2020