Initiate long positions above the 26,500-pt level. The HSIF formed a long white candle yesterday. It gained 576 pts to close at 26,776 pts. Technically speaking, the index has recouped the previous two days’ losses and closed above 3 Feb’s high, implying that the sentiment has turned positive. In addition, the 14-day RSI indicator started to improve after hitting its oversold zone – this indicates a positive signal. Yesterday’s closing also triggered our previous trailing-stop recommendation at the 26,500-pt threshold – which has locked in part of the profits. Note we initially advised traders to initiate short below the 28,300-pt level on 22 Jan.

Currently, the near-term support level is seen at 26,500 pts, set near the midpoint of 4 Feb’s long white candle. This is followed by 26,205 pts, ie 4 Feb’s low. The crucial support is anticipated at 25,880 pts, defined from 3 Feb’s low. On the other hand, we are eyeing the immediate resistance level at 27,162 pts, which was 30 Jan’s high. If a breakout arises, look to 27,556 pts – ie the downside gap resistance of 29 Jan – as the next resistance.

Thus, we advise traders to initiate fresh long positions above the 26,500-pt level. A stop-loss can be set below the 25,880-pt threshold in order to limit the downside risk.

Source: RHB Securities Research - 5 Feb 2020