Our positive view continues, as the bulls remain in control. After 10 increases in a row, the FBMSC finally took a breather yesterday as it dropped 101.83 pts to 14,882.52 pts. It charted a black candle that covered the body of the prior white candle. As a result, a reversal “Bearish Engulfing” candlestick pattern was formed, suggesting that the positive momentum was slowing down. Nevertheless, this minor decrease does not cancel our positive view, as the bulls are still dominating market sentiment.

Technically speaking, market sentiment is still encouraging at this juncture. It is normal to see a breather occurring, especially when we witnessed an overbought condition on 25 Jul. This was after the 14-day RSI indicator surged above the 70-pt overbought level at 74.48 pts. As long as no firm bearish follow-through is in sight, we believe the current bullish bias remains intact.

There is no change to our immediate support at 14,578 pts, ie 14 Jun’s high. For the next support, look to 13,649 pts, or 30 May’s low. Towards the upside, we keep the immediate resistance at 15,188 pts, which is located at the high of 17 Apr. If this level is taken out, our next resistance is found at 16,000 pts – this was derived from near the low and high of 9 Feb and 12 Mar.

Source: RHB Securities Research - 27 Jul 2018