Maintain short positions. The HSIF saw a strong rebound from the 20-day SMA line support, rising 485 pts to settle at 28,804 pts. On the first trading session of the month, the index opened at 28,327 pts. Riding on strong buying interest, it climbed to the day high of 28,935 pts before the 28,804-pt close. During the evening session, the HSIF closed at 28,777 pts after testing the session low at 28,688 pts. Despite Monday’s bullish price action, we think the index may need more sideways consolidation before it can test the resistance near 29,311 pts. To resume the uptrend, the bullish candlestick needs to engulf at least the bearish candlestick that happened on 28 Jan, or breach the 29,311-pt resistance. Meanwhile, if the HSIF falls below the immediate support, it may correct further towards the 50-day SMA line. Since the correction phase is not over yet, we are keeping to our negative trading bias.

We recommend traders maintain short positions. We initiated these at 29,445 pts, or the closing level of 26 Jan. To manage risks, the stop loss is adjusted lower to 29,311 pts.

The immediate support is revised to 1 Feb’s low of 28,154 pts, followed by 27,846 pts. Towards the upside, the immediate resistance is pegged at 29 Jan’s high of 28,980 pts and followed by the next hurdle at 29,311 pts.

Source: RHB Securities Research - 2 Feb 2021