Maintain short positions. After reaching 2021’s high of 31,116 pts, the HSIF pulled back to close at 28,418 pts – a level below the 13-week SMA line. It is observed that as long as the index trades below the 13-week SMA line, it tends to stay in correction mode – at least until it forms a long lower shadow or a bullish reversal candlestick pattern. As we have yet to witness any of this, it is likely that the index will continue trending lower, until it finds a meaningful bottom. This, coupled with the 13-week SMA line turning lower, indicates that selling pressure will accelerate in the coming sessions. We expect the HSIF to retest the 28,000-pt support level in the immediate term. A breach of this psychological level may see it retesting 27,503 pts, or March’s low. As the index has been exhibiting a series of “lower highs and lower lows”, we retain our negative trading bias until the stop-loss is breached.

We recommend traders maintain the short positions initiated at the closing level of 3 May’s day session, ie 28,133 pts. For risk management, the stop-loss is placed at 28,750 pts.

The immediate support remains at the 28,000-pt psychological level, followed by March’s low of 27,503 pts. On the other hand, the immediate resistance is at 28,650 pts, followed by 28,850 pts.

Source: RHB Securities Research - 20 May 2021