Initiate short positions. The E-Mini Dow failed to sustain its earlier session’s gains and ended the latest trade 308 pts weaker at 28,100 pts – the high was posted at 28,669 pts. The closing level also placed the index below the 28,200-pt threshold, which – in our view – signals that the rebound phase, which started from the third week of September, reached an interim top at 28,846 pts on 12 Oct. This implies that chances are high of the E-mini Dow developing a correction phase. Towards the downside, we are seeing a good chance of the index sliding towards the 27,500-pt area. Hence, we switch our trading bias to negative from positive.

Our previous long positions – initiated at 28,179 pts, or the closing level of 7 Oct – were closed out during the latest session at 27,200 pts. Concurrently, we initiate short positions. For risk-management purposes, a stop-loss can be placed above the 28,700-pt threshold.

The immediate support is revised to the 28,000-pt round figure, which was also near 15 Oct’s low. This is followed by 27,500 pts. On the upside, the immediate resistance is pegged at the 28,500-pt mark and followed by 28,700 pts – a price point of 16 Oct.

Source: RHB Securities Research - 20 Oct 2020