Maintain short positions. Yesterday, the FKLI registered a low of 1,766.5 pts – matching the immediate support, before it rebounded to close at 1,776 pts, implying decline of 6 pts. The high was at 1,778 pts. The testing of the immediate support shows the correction phase that we have highlighted is still on-going, and is likely to be extended. The negative bias is further enhanced, as the index is still capped by the 200-day SMA line (current reading: 1,790 pts). On these observations, we maintain our near-term negative trading bias.

Premised on this, we still recommend that traders 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.

We pegged the immediate support at 1,766.5 pts, the low of 31 Jul. This is followed by 1,740 pts, the low of 20 Jul. On the other hand, 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 - 17 Aug 2018