Initiate short positions. The FKLI ended the latest session negatively, as it formed a black candle, which at the closing, slightly breached the previous immediate support of 1,735 pts. For the session, the index registered a high of 1,747.5 pts, before closing at the low of 1,732 pts – implying 26-pt drop. The breakdown from the said previous immediate support suggests the index may be experiencing a deeper retracement after it failed to break above the 200-day SMA line on 7 Jun. At the minimum, the index may retest the 1,700-pt support level. Hence, we are changing our near-term trading bias to negative.

Our previous long positions, initiated at 1,777 pts – the closing level of 6 Jun – were closed out yesterday at 1,735 pts. On our new negative trading bias, we initiate short positions at yesterday’s closing level. To manage risks, investors can set the stop-loss at 1,763 pts.

We revise the immediate support to 1,700-pt mark, the round figure. This is followed by 1,661 pts, which is the low of 19 Jan 2017. On the other hand, the immediate resistance is now set at 1,735 pts, the low of 4 Jun. The following resistance is expected at 1,800, which is a round figure, also near the high of 6 Jun (1,797 pts).

Source: RHB Securities Research - 19 Jun 2018