Keep to short positions as negative trend still in play. Yesterday, the FKLI performed negatively as it formed a black candle and “Downside Gap”, which breached the previous support levels of 1,766.5 pts and 1,759 pts. The session’s low and higher were recorded at 1,705.5 pts and 1,755.5 pts, before it closed at 1,711.5 pts, which is a decline of 59.5 pts. The negative session also sent the index firmly below the 200-day SMA line and invalidated the 25 May’s “Bullish Harami” formation. While the RSI has reached the oversold level (current reading: 25), without any sign of reversal, the overall bias is still firmly intact. On this, we maintain our near-term negative trading bias.

We continue to suggest for traders keep to short positions. This was initiated at 1,804.5 pts, or the closing level of 23 May. To manage risks, investors can now set the trailing-stop at 1,766.5 pts.

We revise the immediate support to 1,700 pts, a round figure. This is followed by 1,661 pts, which is the low of 19 Jan 2017. Towards the upside, the immediate resistance is now set at 1,766.5 pts, the low of 24 May. The second resistance is envisaged at 1,816.5 pts, the high of 24 May.

Source: RHB Securities Research - 31 May 2018