Short call remains intact as market sentiment remains weak. Yesterday, the FKLI inched up 0.50 pts to 1,748.50 pts. Presently, there is no change to our bearish view, in line with the ongoing bearish bias. The appearance of the “Downside Gap” pattern on 30 May suggests that the correction may still be extended further. Although a reversal “Bullish Harami” candlestick pattern appeared on 31 May, a firm upside development is needed to confirm that the bulls have taken control from the bears. As for now, opportunities are still leaning towards the sellers. This is also supported by the fact that the 14-day RSI indicator is situated below the 50-pt neutral level at 35.41 pts – an indication that market sentiment is weak.

In the absence of a strong bullish follow-through, this implies that market sentiment is still favouring the sellers. Thus, we recommend traders to maintain short positions with a trailing-stop pegged at 1,766.5 pts. This is in order to secure part of the trading profits. For the record, our short call was triggered on 23 May after the FKLI dropped below 1,804.5 pts.

The immediate support is maintained at 1,700 pts. This is followed by the next support at the 1,661-pt mark, derived from the low of 19 Jan 2017. On the flip side, we set the immediate resistance at 1,766.5 pts, located at the low of 24 May. For the next resistance, look to 1,816.5 pts, ie 24 May’s high.

Source: RHB Securities Research - 5 Jun 2018