Maintain short positions. Selling momentum in the HSIF continued as expected. A long black candle was formed last Friday, which pointed towards a continuation of the downside move. It dropped to a low of 25,923 pts during the intraday session before ending at 26,170 pts for the day. On a technical basis, market sentiment is likely to remain bearish in the coming sessions. This is because the HSIF has erased the previous week’s gains and marked a lower close below the declining 10-day SMA line. Overall, we keep our bearish view on the index’s outlook.

According to the daily chart, the immediate resistance level is seen at 26,500 pts, which is situated near the midpoint of 28 Feb’s long black candle. The next resistance is anticipated at 26,834 pts, ie the high of 28 Feb. On the other hand, the near-term support level is maintained at the 26,000-pt psychological spot. This is followed by 25,880 pts, which was the previous low of 3 Feb.

Hence, we advise traders to stay short, in line with our initial recommendation to have short positions below the 27,000-pt level on 25 Feb. Currently, a trailing-stop set above the 26,500-pt mark is preferable, so as to limit the risk per trade.

Source: RHB Securities Research - 2 Mar 2020