Maintain long positions. The E-mini Dow experienced a sharp positive price reversal during its latest session – it rebounded from a low of 28,025 pts to close at 28,386 pts, ie a minor 28-pt decline. Consequently, a “Hammer” formation has appeared, indicating a good possibility the index’s recent sessions’ corrections may have reached an end and that the bulls are ready to extend the E-mini Dow’s upward move above the 50-day SMA line. Towards the downside, we now believe our positive trading thesis should stay valid – provided the 28,200-pt support level does not fail.

We recommend traders stay in long positions. We initiated these at 28,179 pts, or the closing level of 7 Oct. For risk-management purposes, a stop-loss can be placed at below the 28,200-pt threshold.

We revise the immediate support level to 28,200 pts – this is followed by the 28,000-pt round figure, which was also near the latest low. Conversely, the immediate resistance is now pegged at the 28,500-pt mark and followed by 28,846 pts, ie the high of 12 Oct.

Source: RHB Securities Research - 16 Oct 2020