Stay short. The downward momentum in the E-mini Dow continued as expected. Another black candle was formed yesterday, which pointed towards a continuation of the downside move. It lost 203 pts to close at 26,914 pts, off the session’s high of 27,519 pts. On a technical basis, investor sentiment remains bearish, as the E-mini Dow has marked a lower close vis-à-vis the previous sessions since 20 Feb. This may also further extend the downside swing that started from the high of 13 Feb. Overall, we remain bearish on the E-mini Dow’s outlook.

As seen in the chart, we are eyeing the immediate resistance level at 27,500 pts, set near the midpoint of 25 Feb’s “Long Black Day” candle. The next resistance would likely be at the 28,000-pt psychological mark. Towards the downside, we anticipate the immediate support level at 26,588 pts, ie the previous low of 23 Oct 2019. If this level is taken out, look to 25,983 pts – which was the low of 10 Oct 2019 – as the next support.

Hence, we advise traders to stay short, in line with our initial recommendation to have short positions below the 28,105-pt level on 25 Feb. In the meantime, a trailing-stop can be set above the 27,500-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 27 Feb 2020