Stay long while setting a trailing-stop below the 27,340-pt level. The HSIF ended lower to form a black candle yesterday. It lost 416 pts to settle at 27,426 pts. However, from a technical perspective, the formation of yesterday’s black candle can be viewed as a result of profit-taking activities that followed the recent gains seen over the past three weeks. We think the market sentiment remains positive, as the index is still trading above the rising 10-day SMA line. Overall, we believe the uptrend remains intact.

According to the daily chart, we now anticipate the immediate support level at 27,340 pts, set near the midpoint of 11 Feb’s long white candle. The next support would likely be at 26,905 pts, ie the low of 10 Feb. Towards the upside, the near-term resistance is now seen at 27,630 pts, ie near the midpoint of 18 Feb’s black candle. This is followed by 28,012 pts, which was the high of 17 Feb.

Thus, we advise traders to stay long, since we previously recommended initiating long above the 27,338-pt level on 12 Feb. For now, a trailing-stop set below the 27,340-pt threshold is advisable in order to limit the downside risk.

Source: RHB Securities Research - 19 Feb 2020