Maintain short positions. The HSIF was testing its immediate support level yesterday, forming a long lower shadow near the 27,744-pt support level. On Wednesday, the index started the session at 27,818 pts. After gyrating between the high and low of 27,980 pts and 27,706 pts, it closed at 27,902 pts, ie 44 pts less than the previous session. In the evening session, it last traded at 27,896 pts after touching the session low of 27,746 pts. From the price action, we see the bears hesitating near the support level. Although the selling pressure slowed down, the RSI is still below the 50% threshold, where a technical rebound may not sustain and will be met with renewed selling pressure. Furthermore, we need to be mindful that support levels tend to be weak in a downtrend market. In a worst-case scenario, if selling pressure accelerates again, the HSIF may retest May’s low, ie 27,487 pts. Breaching this level will see a deeper correction. With the negative momentum in play, we retain our negative trading bias.

Traders are recommended to hold on to the short positions initiated at 28,630 pts, or the closing level of 30 Jun’s day session. For risk management, the stop loss is adjusted to 28,600 pts, ie a level above the 20-day SMA line.

The immediate support is marked at 27,744 pts – 11 May’s low – and followed by 27,487 pts, or the low of 13 May. The immediate resistance is seen at 28,338 pts, ie the high of 5 Jul, and followed by 28,771 pts – 2 Jul’s high.

Source: RHB Securities Research - 8 Jul 2021