Initiate short positions. The E-mini Dow experienced its third consecutive weak closing, ending 549 pts lower at 27,525 pts – crossing below the previous support mark of 28,000 pts. The breakdown from the said support indicates the index is now developing a deeper correction phase following its previous run-up between mid-June and last week, which stalled near the 29,000-pt resistance. Towards the downside, there is a good chance for the index to retest both the 50- and 200-day SMA lines. Premised on this, we switch our trading bias from positive to negative.

Our previous long positions initiated at 26,491 pts, ie the closing level of 14 Jul, were closed out at 28,000 pts in the latest session. Concurrently, we initiate short positions. For risk-management purposes, a stop-loss can be placed above 28,500 pts.

The immediate support is revised to 27,192 pts, which is the low of 20 Aug. This is followed by the 27,000-pt round figure, a level slightly below the 200-day SMA line. Moving up, the resistance points are pegged at 27,800 pts and 28,000 pts.

Source: RHB Securities Research - 9 Sept 2020