Stay short. The downward momentum in the HSIF continued as expected. A black candle was formed yesterday, which pointed towards a continuation of the upside move. It dropped 84 pts to close at 24,069 pts. Market sentiment remains negative, as the index has posted a second consecutive black candle and marked a lower close below the 24,777-pt resistance mentioned previously. We view yesterday’s candle as a continuation of the bearish reversal pattern of 29 Apr’s “Shooting Star” pattern. Overall, we keep our negative view on the HSIF’s outlook.

As seen in the chart, the immediate resistance level is maintained at 24,777 pts, set at the high of 29 Apr’s “Shooting Star” pattern. The next resistance is seen at the 25,000-pt psychological mark. Towards the downside, we anticipate the immediate support level at 23,770 pts, ie near the lows of 7-8 May. If a breakdown arises, look to 23,240 pts – which was near the previous low of 5 May – as the next support.

Hence, we advise traders to maintain short positions, since we had originally recommended initiating short below the 24,132-pt level on 8 May. In the meantime, a stop-loss can be set above the 24,777-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 14 May 2020