Maintain short positions. The HSIF fell below the 20-day SMA line yesterday to settle at 26,345 pts. The index opened at 26,350 pts during the day session, and attempted to stage a rebound by testing the day high of 26,517 pts. However, the bulls failed to hold on to the gains, retracing to the 26,263-pt low. The evening session saw further correction, as the index slid to the low of 25,957 pts, before rebounding to close at 26,294 pts – forming a hammer pattern overnight. The latest price action reaffirms our view that the index is in a downtrend, displaying lower highs and lower lows. Over the next four sessions, if the index fails to close above the 20-day SMA line, the moving average will curve lower and exert more selling pressure. In this case, the index could find its next support near the 50-day SMA line. As the index is moving lower, we maintain our negative trading bias.

We recommend traders maintain short positions. We initiated these at 26,427 pts, or the closing level of 7 Dec. For risk-management purposes, a stop-loss can be placed above 26,932 pts.

Immediate support is marked at 25,920 pts, followed by 9 Nov’s low of 25,576 pts. On the upside, the immediate resistance is pegged at 7 Dec’s high of 26,932 pts, followed by the round figure hurdle at 27,000 pts.

Source: RHB Securities Research - 22 Dec 2020