Stay long, with a trailing-stop set below the 23,500-pt support. After posting two white candles in a row, the HSIF ended lower to form a black candle yesterday. It declined 659 pts to settle at 23,764 pts. However, we believe the positive sentiment stays unchanged, as the index has continued to remain above the rising 10-day SMA line. Yesterday’s black candle indicates profit-taking activities after the recent gains, in our view. Overall, we think the upside swing, which began from 2 Apr’s “Hammer” pattern, is not over yet.

Based on the daily chart, the immediate support level is set at 23,500 pts, ie near the midpoint of 6 Apr’s white candle. The crucial support level is anticipated at 22,560 pts, which was near the low of 2 Apr’s “Hammer” pattern. Towards the upside, we now anticipate the immediate resistance level at 24,600 pts – this was obtained near 8 Apr’s high. Meanwhile, the next resistance is maintained at 25,750 pts, ie near the high of 11 Mar.

Hence, we advise traders to stay long, in line with our initial recommendation to have long positions above the 22,300-pt level on 25 Mar. In the meantime, a trailing-stop set below the 23,500-pt threshold is preferable to lock in part of the gains.

Source: RHB Securities Research - 9 Apr 2020