Stay short, with a trailing-stop set above the 23,780-pt resistance. After posting three black candles in a row, the E-mini Dow ended higher to form a positive candle yesterday. It rose 368 pts to settle at 23,534 pts, off its low of 22,704 pts. However, the negative sentiment stays unchanged, as this candle can only be viewed as the sellers probably taking a pause after the recent losses. Since the index is still holding below the 10-day SMA line, this indicates that the downside move is not over yet. Overall, we believe the downside swing, which started off 11 May’s “Bearish Harami” pattern, should likely persist in the coming sessions.

As seen in the chart, the immediate resistance level is maintained at 23,780 pts, which was the high of 13 May. The next resistance is anticipated at 24,471 pts, ie the high of 11 May’s “Bearish Harami” pattern. Towards the downside, the support level is now seen at 22,704 pts, which was obtained from 14 May’s low. Meanwhile, the next support is set at the 22,000-pt round figure.

Hence, we advise traders to stay short, following our recommendation of initiating short below the 23,780-pt level on 14 May. For now, a trailing-stop can be set above the 23,780-pt mark as well to limit the risk per trade.

Source: RHB Securities Research - 15 May 2020