Stop-loss level triggered; short positions initiated. The E-Mini Dow saw volatility increasing during Monday and Tuesday’s sessions. It initially breached the psychological support before making a technical rebound to close at 34,400 pts yesterday. From the price action, the index has formed “lower highs with lower lows” – technically, it has started the correction phase and we expect more downside risks. However, strong buying interest was also seen near the 34,000-pt support level – we do not rule a technical rebound extension. If the latest positive momentum follows through, it may cross the immediate resistance to form a fresh “higher high” pattern and revert back to an upward trajectory. Otherwise, the E-Mini Dow will consolidate sideways, with selling pressure near the 50-day SMA line. Since the index has breached the trailing stop during Monday’s session, we shift to a negative trading bias.

We closed out the long positions initiated at 34,082 pts – the closing level of 24 Jun – after the trailing-stop level at 34,150 pts was triggered on 19 Jul. Conversely, we initiate short positions at the closing level of 19 Jul, ie 33,839 pts. To control the trading risks, an initial stop-loss threshold is placed at 34,700 pts.

The immediate supports are marked at 34,000 pts and 33,623 pts, ie 19 Jul’s low. Meanwhile, the nearest resistance level is pegged at 34,579 pts – the high of 19 Jul – and followed by 34,975 pts, or 16 Jul’s high.

Source: RHB Securities Research - 21 Jul 2021