Maintain short positions. The HSIF formed a long black candle yesterday. It closed at 22,003 pts, off the session’s high of 23,417 pts. Based on the current outlook, we think the downside move is not over yet, as yesterday’s black candle has erased most of the previous session’s gains. Given that the HSIF is still trading below the declining 10- day SMA line, this implies that the market correction that started from mid-January may carry on. Overall, we remain bearish on the index’s outlook.

As seen in the chart, we are eyeing the immediate resistance level at 23,390 pts, which was the high of 17 Mar. Meanwhile, the next resistance is maintained at the 24,000-pt psychological spot. To the downside, the immediate support level is seen at 21,588 pts, ie the low of 17 Mar. If a decisive breakdown arises, the next support would likely be at the 21,000-pt round figure.

Hence, we advise traders to stay short, following our recommendation of initiating short below the 25,000-pt level on 10 Mar. A trailing-stop can be set above the 23,390-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 19 Mar 2020