Initiate long positions above the 26,000-pt level. The E-mini Dow formed a long white candle last night. It surged 1,104 pts to close at 26,468 pts. Technically, the index has recouped more than 50% of the losses from 27 Feb’s long black candle, implying that the sentiment has turned positive. Yesterday’s white candle has engulfed the prior one to form a “Bullish Engulfing” pattern, implying a potential rebound as well. Yesterday’s closing also triggered our previous trailing-stop recommendation at the 25,772-pt threshold, which has locked in part of the profits. Recall that we initially advised traders to initiate short below the 28,105-pt threshold on 25 Feb.

Based on the daily chart, the immediate support level is seen at the 26,000-pt psychological spot. The next support is anticipated at the 25,500-pt round figure, which is also set near the low of 27 Feb. On the other hand, the immediate resistance level is set at 27,225 pts – this is attached near the 200-day SMA line. The next resistance should likely be at 27,519 pts, ie the high of 26 Feb.

Hence, we advise traders to initiate long positions above the 26,000-pt level. A stop-loss can be set below the 25,500-pt threshold to limit the downside risk.

Source: RHB Securities Research - 3 Mar 2020