Maintain short positions. The E-Mini Dow formed a black candle yesterday to break below the previous 28,000- pt immediate support and 50-day SMA line. The index settled 608 pts weaker at 27,581 pts after hitting a low of 27,259 pts. While the retracement phase – which started from the high of 28,846 pts recorded on 12 Oct – has met our minimum expectation of reaching the 27,500-pt mark, there is no positive price reversal signal spotted that could mark an end to the ongoing retracement phase. Additionally, the RSI continues to slide lower, with the latest reading standing at 42.8. We maintain our negative trading bias.

We recommend traders stay in short positions. We initiated these at 28,100 pts, which was the closing level of 19 Oct. To manage risks, a stop-loss can be placed above the 28,400-pt threshold.

The immediate support is revised to 27,500 pts, which is followed by 27,100 pts – a price point near the low of 2 Oct. On the upside, the immediate resistance is now pegged at the 28,000-pt round figure and followed by 28,400 pts – a level slightly above 23 Oct’s high

Source: RHB Securities Research - 27 Oct 2020