Stop-loss level triggered; initiate short positions. The E-Mini Dow’s selling pressure continued last Friday – it dropped 512 pts to settle at 34,627 pts. The index began the session at 35,717 pts and moved in a volatile fashion – it whipsawed and touched the 35,330-pt session high during the early US trading session before strong selling pressure kicked in. The E-Mini Dow was then dragged from the peak towards the lowest point of the session at 34,511 pts – below the immediate support of 34,800 pts – which was also its stop-loss level. The long black candlestick printed for two consecutive sessions suggests the selling pressure is getting more obvious. With the RSI continuing to fall near the 40% threshold – suggesting weak momentum – the downwards pressure is expected to remain in the medium term. Since the index has breached the stop-loss level, we shift to a negative trading bias.

We closed out our long positions – initiated at 34,997 pts or the closing level of 31 Jan – after the stop-loss mark at 34,800 pts was triggered. Conversely, we initiate short positions at the closing level of 11 Feb, ie 34,627 pts. For risk-management purposes, the stop-loss threshold is placed at 35,590 pts.

The first support is revised to 33,928 pts or the low of 1 Dec 2021. This is followed by 33,031 pts, ie the low of 24 Jan. Conversely, the resistance levels are revised to 34,800 pts and followed by 35,590 pts, which was 2 Feb’s high.

Source: RHB Securities Research - 14 Feb 2022