FKLI: Buying Interest Continues

Upward momentum will likely persist; stay long. The FKLI formed a white candle yesterday, pointing to the continuation of the upside move. It gained 12.50 pts to close at the high of 1,728 pts, off the session’s low of 1,716.50 pts. From a technical perspective, investor sentiment remains positive in the near term, as the index has stayed above the 1,700-pt threshold for the fifth consecutive day. Moreover, if the 14-day RSI indicator rises above the 50 reference point to flash a bullish reading at 52.26-pt, the bullish sentiment has been enhanced.

Based on the daily chart, we are eyeing the immediate support level at the 1,700-pt psychological spot. If this level is taken out, look to 1,657 pts – ie the low of the “Bullish Engulfing” pattern – as the next support. Towards the upside, the near term resistance level is anticipated at 1,745 pts, near the lows of 27-29 May and also 1 Jul’s high, followed by 1,757 pts, ie the previous low of 11 Mar.

Hence, we advise traders to stay long, following our recommendation of initiating long positions above the 1,700-pt level on 15 Jul. Meanwhile, a stop-loss can be set below the 1,657-pt mark in order to minimise the downside risk.

FCPO: Downward Swing Resumes

Stay short, with a trailing-stop set above the MYR2,205 level. Selling interest on the FCPO continued as expected, as a second consecutive black candle was formed yesterday. The commodity settled at MYR2,193, off the session’s high of MYR2,207 and a low of MYR2,176. Since yesterday’s candle has marked a lower close below the MYR2,200 threshold and the MYR2,205 resistance mentioned previously – this implies that the bears still have control of the market. The 14-day RSI turned lower for a weak reading, at 43.11 pts as of yesterday, which implies that the sentiment is bearish.

Technically speaking, we are eyeing the immediate resistance level at MYR2,205, obtained from the downside gap resistance of 8 Jul. The next resistance will likely be at MYR2,285, ie near the highs of 25 Jun and 3 Jul. On the other hand, we anticipate the support levels at MYR2,121 and MYR2,070, which were the lows of 25 May and 29 Apr respectively.

Thus, we advise traders to stay short, given that we previously recommended initiating short positions below the MYR2,254 level on 23 Jun. A trailing-stop can be set above the MYR2,205 mark to secure part of the gains. Meanwhile, in order for the market to sustain its downside move, it would be better if the FCPO continues to trade below the MYR2,200 level in the coming sessions.

Source: RHB Research - 16 Jul 2015