Deeper retracement may be developing; initiate short positions. Yesterday, the FKLI formed a black candle that led it to close below both 1,800 pts and, more importantly, the 200-day SMA line. The intraday trend was weak, moving from a high of 1,797 pts to a low of 1,773 pts, before closing 26.5 pts lower at 1,775 pts. We take the rebreaking of the 1,800 pts and the 200-day SMA line as signs that the index’s rebound from the low of 1,655 pts on 28 Jun has reached to an end. This implies some form of correction – probably in the form of a deeper retracement developing. Hence, we revise our near-term trading bias to negative.

Our previous long positions, initiated at 29 Jun’s close of 1,688.5 pts, were closed out yesterday at 1,796 pts. On the bias that a deeper retracement is likely to develop in the near term, we initiate short positions at yesterday’s closing level. For risk management purposes, stop-loss can be placed at above 1,810.5 pts.

We continue to peg the immediate support at 1,766.5 pts, the low of 31 Jul. This is followed by at 1,740 pts, the low of 20 Jul. On the other hand, we revise the immediate resistance to 1,810.5 pts, the highs of 9 and 10 Aug. This is followed by 1,844.5 pts, the high of 23 May

Source: RHB Securities Research - 14 Aug 2018