Stay short, provided that the 24,000-pt resistance is not violated at the closing. The HSIF ended higher to form a white candle yesterday. It gained 252 pts to close at 23,924 pts, after oscillating between a high of 23,936 pts and low of 23,388 pts. However, the buying momentum is considered weak, as the index is still holding below the 10-day SMA line. Again, as long as the HSIF fails to close above the 24,000-pt resistance mentioned previously, we believe the sellers still have control of the market.

Based on the daily chart, we anticipate the immediate resistance level at the 24,000-pt psychological mark. The next resistance would likely be at 24,777 pts, determined from the high of 29 Apr’s “Shooting Star” pattern. On the other hand, the immediate support level is seen at 23,240 pts, obtained near the low of 5 May. If a breakdown arises, look to 22,560 pts – ie near the low of 2 Apr – as the next support.

Hence, we advise traders to maintain short positions, following our recommendation of initiating short below the 24,132-pt level on 8 May. In the meantime, a trailing-stop can be set above the 24,000-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 19 May 2020