Stay long, with a trailing-stop set below the 27,220-pt level. The HSIF ended higher to form a positive candle last Friday. It rose to a high of 27,908 pts during the intraday session, before ending at 27,753 pts for the day. Based on the current outlook, the index has been able to stay above the rising 10-day SMA line, which implies that the buyers are still in control of the market. With the 14-day RSI indicator recovered to a more positive reading at 52.58 pts, this has led us to believe that the rebound that began from 4 Feb’s long white candle may persist.

As seen in the chart, the immediate support level is now seen at 27,495 pts, determined near the lows of 12 and 14 Feb. If a decisive breakdown arises, the next support is anticipated at 27,220 pts, ie near the rising 10-day SMA line. To the upside, we maintain the near-term resistance level at the 28,000-pt psychological spot. This is followed by 28,379 pts, which was the high of 22 Jan.

Hence, we advise traders to maintain long positions, in line with our initial recommendation to have long positions above the 27,338-pt level on 12 Feb. A trailing-stop can be set below the 27,220-pt threshold in order to minimise the downside risk.

Source: RHB Securities Research - 17 Feb 2020