Maintain short positions. After a volatile session, the HSIF retraced 186 pts to settle at 28,892 pts. It managed to close above the 50-day SMA line after forming a long lower shadow candlestick pattern. It gapped lower last Friday to open at 28,580 pts. After touching the day low of 28,370 pts, it climbed to the 29,276-pt day high before momentum softened to close at 28,892 pts. Riding on positive buying interest, the HSIF closed higher at 29,048 pts during the evening session. With the latest positive price action, the selling pressure that started since the Bearish Engulfing pattern may have eased, and the index may consolidate along the 50-day SMA line before regaining momentum to retest the overhead resistance of the 20-day SMA line. A breakdown below 29,000 pts will see another downward movement, while breaching the 20-day SMA line will see an uptrend resumption. Since the HSIF’s movement is still bounded by “lower highs with lower lows”, we are keeping our negative trading bias until the trailing stop is breached.

We recommend traders maintain the short positions initiated at 30,077 pts, or the closing level of 22 Feb. For riskmanagement purposes, the trailing stop can be placed at 29,700 pts.

The immediate support remains at 28,500 pts, followed by 28,370 pts. Towards the upside, the immediate resistance is pegged at the 29,500-pt round figure and followed by the 30,000-pt psychological level.

Source: RHB Securities Research - 8 Mar 2021