Stay long, with a trailing-stop set below the 22,560-pt level. The HSIF formed a positive candle with a long lower shadow yesterday, signalling that the sellers had failed to reverse the bullish sentiment. During the intraday session, it plunged to a low of 22,561 pts before pushing up to 23,269 pts at the end of the session. This is a sign that the buying momentum has not diminished. As shown in the chart, at yesterday’s close, the index had formed a “Hammer” pattern, implying a potential rebound. This also indicates that the outlook is still positive.

Presently, the immediate support level is seen at 22,560 pts, ie near the low of 2 Apr’s “Hammer” pattern. Meanwhile, the next support is anticipated at the 22,000-pt psychological mark. On the other hand, we now anticipate the immediate resistance level at 24,050 pts, which was near the high of 27 Mar. The next resistance would likely be at 24,750 pts, determined near the high of 16 Mar.

Therefore, we advise traders to stay long, since we initially recommended initiating long above the 22,300-pt level on 25 Mar. For now, a trailing-stop can be set below the 22,560-pt threshold in order to limit the downside risk.

Source: RHB Securities Research - 3 Apr 2020