Maintain long positions. The FKLI ended yesterday’s session in the neutral position – as it closed marginally lower by 2.5 pts at 1,686 pts, after ranging between a low and high of 1,680.5 pts and 1,694.5 pts. We maintain that the bias for the index to extend its rebound after reaching the low of 1,655 pts on 28 Jun, is still valid. This is despite having observed the rebound since the said low as still technically weak. This rebound, at the minimum, represents a correction phase for the index’s recent bout of retracement, which (happened after the failed attempt to break above the 200-day SMA line on 6 Jun) sent the RSI to an oversold level of 24 on 27 Jun. On this, we maintain our near-term positive trading bias.

The index’s rebound so far is still weak. However, as long as the 1,655 pts is not broken, we continue to recommend traders to maintain long positions, initiated on 29 Jun’s closing level of 1,688.5 pts. For risk management purposes, a stop-loss can be set at 1,655 pts.

Towards the downside, the immediate support is at 1,655 pts, the low of 28 Jun. The second support is at 1,600, or the next round figure. Towards the upside, the immediate resistance is at 1,735 pts, which was the low of 4 Jun. This is followed by 1,800 pts, which was near the high of 7 Jun.

Source: RHB Securities Research - 6 Jul 2018