Initiate long positions. After bouncing off the 20-day SMA line, the HSIF saw follow-through price action yesterday, rising 426 pts to settle at 29,230 pts. The index opened at 28,980 pts and travelled to the day’s high of 29,438 pts, before settling at 29,230 pts. During the evening session, the HSIF retraced slightly to close at 29,173 pts. The last 10 sessions recorded an average trading range (ATR) of 404 pts. By projecting 2.5x ATR from the latest settlement price of 29,230 pts, we estimate the support level to be at 28,220 pts. The RSI indicator is pointing up, indicating that positive momentum is building up. As the index reacted positively at the 20-day SMA line support level, we think the correction phase is over. As such, we are shifting over to a positive trading bias.

Our short positions, initiated at 29,445 pts or the closing level of 26 Jan, were closed out during the latest session. We initiate long positions at the closing level of 2 Feb. To manage risks, the stop-loss is placed at 28,220 pts.

The immediate support is revised to the round figure of 28,500 pts, followed by 28,220 pts. Towards the upside, the immediate resistance is pegged at 29,500 pts, and followed by the psychological level of 30,000 pts.

Source: RHB Securities Research - 3 Feb 2021