Maintain long positions. The E-Mini Dow saw profit taking extend last Friday, falling 300 pts to settle at 34,564 pts – just 16 pts above the minor support level of 34,548 pts. The index initially opened at 34,838 pts and rose to the session high of 34,975 pts. However, the bears were eager to take profit during the US session, bringing the EMini Dow to the session low of 34,524 pts before it settled at 34,564 pts. Once again, the index is testing the support level of 34,548 pts – we will look to see if it can bounce off from here in the coming sessions. If profit taking is extended, the E-Mini Dow may drift lower to the next support at 34,377 pts, followed by the 34,000-pt psychological level. Breaching these levels may see the formation of a “lower low”, hence posing the risk of the trend turning bearish. Conversely, if the bulls manage to stage a rebound, we may see the index reverting back to positive territory once again. Since the trailing stop is intact, we stick to our positive trading bias.

We recommend traders stay with the long positions initiated at 34,082 pts, or the closing level of 24 Jun. To mitigate the downside risks, a trailing-stop threshold is placed at 34,150 pts.

The immediate support stays at 34,548 pts, or the low of 12 Jul. This is followed by 34,377 pts, ie the low of 1 Jul. Meanwhile, the nearest resistance level is pegged at 35,000 pts – 2021’s high – and followed by the higher hurdle projected at 35,200 pts, which is in uncharted territory.

Source: RHB Securities Research - 19 Jul 2021