Keep in long positions as the bullish bias remains in play. The FKLI dipped 3.50 pts yesterday to 1,805 pts. It dropped below the previous 1,810.50-pt support and left a “Downside Gap” pattern. This shows that the session was led by the sellers, and the selling activities are likely to continue in the coming sessions. However, as long as the index does not breach below 1,766.50 pts, we believe that the bulls are still in control of the market. The fact that the index is hovering above the 200-day SMA line also points towards a positive outlook. This supports our upside view.

Until a strong downside development is in sight in the daily chart above, we believe that the upside bias has not been fully negated. As such, it is best that traders maintain long positions with a stop-loss pegged below 1,766.5 pts. This is in order to minimise the downside risk. For the record, our long recommendation was made at 1,812 pts, which is the closing level of 27 Aug.

Towards the downside, the immediate support is now at 1,766.5 pts, ie the low of 31 Jul. This is followed by the next support at the 1,740-pt mark, located at the low of 20 Jul. Meanwhile, we set the immediate resistance at 1,810.5 pts, ie the highs of 9 and 10 Aug. This is followed by the next resistance at the 1,828-pt threshold, derived from the high of 29 Aug.

Source: RHB Securities Research - 4 Sept 2018