Maintain short positions as the negative bias is still in play. The FKLI closed on a neutral tone yesterday, as it managed to rebound from losses in the early part of the session. The session’s low and high were posted at 1,663.5 pts and 1,681.5 pts, before the index closed at 1,676.5 pts, marking a marginal gain of 1 pt. As the index continues to cap at levels below the immediate resistance of 1,700 pts – despite the daily RSI reaching the oversold level of 26.5 – this implies that, presently, there is no sign of a possible deeper rebound taking place. Hence, we keep to our near-term negative trading bias.

Since the index’s weakening bias is still not showing signs of ending, the retracement that started after the failed attempt to break above the 200-day SMA line on 7 Jun is still firmly in play. Hence, we continue to recommend that traders keep to short positions – initiated at 1,732 pts (the closing level of 18 Jun). To manage risks, we a trailingstop can be set at 1,700 pts.

The immediate support is set at 1,661 pts, the low of 19 Jan 2017. This is followed by 1,600 pts, the next round figure. On the other hand, the immediate resistance is set at the 1,700-pt mark. This is followed by 1,735 pts, the low of 4 Jun.

Source: RHB Securities Research - 27 Jun 2018