Correction is on-going; maintain short positions. The FKLI closed neutrally yesterday, although, at one point, it was close to testing the 200-day SMA line (current reading: 1,790 pts). The session was marked by an intraday high of 1,787.5 pts, before the index dropped to close at 1,782 pts, indicating a marginal gain of 1 pt. The low was at 1,775.5 pts. The FKLI’s inability to break above the 200-day SMA line indicates the near-term bias is still negative. We believe this correction phase is still in its initial development. It was triggered after the relatively steep uptrend over recent weeks. On this, we maintain our near-term negative trading bias.

As the current bias is for the index to extend its correction phase, we continue to advise traders to keep to short positions. We initiated these positions at 1,775 pts, the closing level of 13 Aug. For risk management purposes, a stop-loss can be set above 1,810.5 pts.

Towards the downside, the immediate support is set at 1,766.5 pts, the low of 31 Jul. The second support is at 1,740 pts, the low of 20 Jul. Towards the upside, the immediate resistance is set at 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 - 16 Aug 2018