Maintain long positions. The E-Mini Dow dropped significantly yesterday, erasing 521 pts to settle at 34,971 pts, ie breaching below the 50-day and near its 200-day average lines. It opened positive at 35,545 pts and merely touched the 35,569-pt day high before shifting southwards towards the end of the sessions. The index fell strongly towards the day’s low of 34,941 pts before bouncing to close at 34,971 pts. The session’s “Bearish Engulfing” candlestick depicts strong profit-taking activities following the recent rally. This is in line with our expectation for profit-taking to happen between the 50- and 200-day average lines before the E-Mini Dow propels northwards. However, the bullish momentum remains intact above the 34,800-pt support. With that, we stick to a positive trading bias.

Traders should hold on to the long positions initiated at 34,997 pts or the closing level of 31 Jan. For riskmanagement purposes, the stop-loss threshold is set at 34,800 pts.

The immediate support sets at 34,800 pts and followed by 33,928 pts, ie 1 Dec 2020’s low. The immediate resistance is pegged at 35,430 pts – 19 Jan’s high – and followed by 36,390 pts, which was 13 Jan’s high.

Source: RHB Securities Research - 4 Feb 2022