Initiate short positions below the 23,630-pt level. The HSIF formed a long black candle yesterday. It plunged 1,129 pts to close at 23,373 pts. The index successfully closed below the 10-day SMA line and hit its lowest point in nearly a month, implying that the sentiment has turned bearish. This can be viewed as a continuation of the sellers extending the downside swing from the “Shooting Star” pattern that formed on 29 Apr. Yesterday’s closing has also triggered our previous trailing-stop recommendation at the 23,418-pt mark – which has locked in part of the profits – since we initially advised traders to initiate long above the 22,300-pt level on 25 Mar.

Currently, we anticipate the immediate resistance level at 23,630 pts, ie near 21 Apr’s low. The next resistance is seen at the 24,000-pt round figure, also set near the midpoint of 4 May’s long black candle. To the downside, we are eyeing the support level at the 23,000-pt psychological spot. This is followed by 22,560 pts, which was near the previous low of 2 Apr.

Hence, we advise traders to initiate short positions below the 23,630-pt level. A stop-loss can be set above the 24,000-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 5 May 2020