The ongoing bullish bias enhances our positive view. At yesterday’s close, the FBMSC registered a 47.37-pt gain to 14,469.23 pts. The index is now taking a breather below the 50-day SMA line. This is viewed as a normal reaction, especially after the FBMSC posted a more than 700-pt increase and breached above the previous 14,389-pt resistance during the 31 May-7Jun period. Meanwhile, we see that the 14-day RSI indicator has returned slightly above the 50-pt neutral level at 50.71 pts – this is a reflection of improved market strength.

Overall, we believe the trend is shifting towards the upside from downside previously. The appearance of 5 Apr’s “Bullish Harami” and 6 Apr’s “Hammer” patterns at the index’s 2-year low were the earliest signals that the correction had hit its limit. In addition, this month’s two important reversal signals, ie the “Double Bottom” and “Bullish Divergence” patterns, enhance our positive view.

We keep the immediate support at 14,389 pts, which is located at the low of 26 Apr’s “Bullish Harami” pattern. This is followed by the 13,719-pt support, or the low of 5 Apr’s “Bullish Harami” pattern. On the flip side, our immediate resistance is set at 15,188 pts, which was the high of 17 Apr. This is followed by the next resistance at 15,857 pts, or the low of 6 Feb’s “Hammer” pattern.

Source: RHB Securities Research - 14 Jun 2018