Initiate long positions. The E-mini Dow staged a strong comeback in the latest session, rebounding from a low of 27,539 pts to close at 28,179 pts. The closing above the previous resistance mark of 28,000 pts has nullified the previous session’s “Bearish Engulfing” formation, suggesting a valid breakout from both the 50-day SMA and multiweek downtrend lines. These imply there is a fair chance for the rebound to extend higher. Premised on this, we switch our trading bias from negative to positive.

Our previous short positions initiated at 27,525 pts, or the closing level of 8 Sep, were closed out at the latest session at 28,000-pt. Concurrently, we initiate long positions. For risk-management purposes, a stop-loss can be placed below 27,500 pts.

The immediate support is maintained at 27,500 pts, followed by 27,109 pts. Towards the upside, the immediate resistance is set at 28,367 pts, which was the high of 16 Sep, and followed by 28,500 pts.

Source: RHB Securities Research - 8 Oct 2020