Stay short, with a stop-loss set above the 24,000-pt resistance. After posting a long black candle, the HSIF ended higher to form a white candle yesterday. It gained 386 pts to close at 23,759 pts, off its low of 23,241 pts. However, we believe the selling momentum is not diminished yet, as the index is still trading below the 10-day SMA line. Yesterday’s white candle indicates a technical rebound after the recent losses, in our view. Overall, we believe that the downside swing – which started from 29 Apr’s “Shooting Star” pattern – may continue.

As seen in the chart, the immediate resistance level is seen at the 24,000-pt round figure, situated near the midpoint of 4 May’s long black candle as well. The next resistance would likely be at 24,777 pts, ie the high of 29 Apr’s “Shooting Star” pattern. To the downside, we are eyeing the immediate support level at 23,240 pts, obtained near 5 May’s low. Meanwhile, the next support is anticipated at 22,560 pts, ie near the previous low of 2 Apr.

Thus, we advise traders to stay short, given that we previously recommended initiating short below the 23,630-pt level on 5 May. A stop-loss can be set above the 24,000-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 6 May 2020