Initiate short positions below the 23,780-pt level. The E-mini Dow ended lower to form a black candle last night. It lost 408 pts to close at 23,166 pts. Technically, the index has posted the third consecutive black candle and dipped below the 10-day SMA line, implying that the sentiment has turned bearish. This can be viewed as a continuation of the sellers extending the downside swing from the “Bearish Harami” pattern that formed on 11 May. Yesterday’s closing also triggered our previous trailing-stop recommendation at the 23,428-pt mark – which has locked in part of the profit. Note that we initially advised traders to initiate long above the 20,280-pt level on 26 Mar.

Currently, we anticipate the immediate resistance level at 23,780 pts, ie 13 May’s high. The next resistance is seen at 24,471 pts, which was the high of 11 May’s “Bearish Harami” pattern. On the other hand, the support level is set at 22,814 pts, defined from the previous low of 21 Apr. This is followed by the 22,000-pt round figure.

Thus, we advise traders to initiate fresh short positions below the 23,780-pt level. A stop-loss can be set above the 24,471-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 14 May 2020