Initiate long positions as a deeper rebound may be taking place. Last Friday saw the FKLI form a white candle, which at the closing, marginally breached above the previous immediate resistance of 1,688 pts. The low and high of the session were recorded at 1668.5 pts and 1,699 pts, before closing at 1,688.5 pts – a gain of 22 pts. While the previous immediate resistance was barely breached, we consider it a valid signal that the index may be in the midst of developing a deeper rebound. This implies that the index’s retracement since the failed attempt to break above the 200-day SMA line on 7 Jun has reached an end, at least for now. This came after the daily RSI reached an oversold level of 24 on 27 Jun. On this, we now turn our near-term trading bias to positive.

Our previous short positions, which were initiated at 1,732 pts ie the closing of 18 Jun, were closed out in the latest session at 1,688 pts. On our new near-term trading bias, we initiate long positions at last Friday’s closing. To manage the risks, we set the stop-loss at 1,655 pts.

We revise the immediate support to 1,655 pts, which was the low of 28 Jun. The following support is at 1,600, or the next round figure. Towards the upside, the immediate resistance is now expected at 1,735 pts, which was the low of 4 Jun. Breaking this may see the FKLI test 1,800 pts, which is near the high of 7 Jun.

Source: RHB Securities Research - 2 Jul 2018