Maintain long positions, pending concrete signs of a deeper retracement. The FKLI registered a marginal loss yesterday. The low was at 1,766.5 pts, matching the immediate support. After registering a low, a rebound set in and took the index to a high of 1,788 pts, before settling at 1,772.5 pts, indicating a decline of 3 pts. The said immediate support, which was re-tested on 12 Sep, is an important technical level. If this is broken, the index would be at risk of moving into a deeper retracement – as it will signal a price rejection from the 200-day SMA line, which now located near the 1,800 pts mark. Until this happens, we maintain our near-term positive trading bias.

As there is still no clear signal to suggest the bears have wrestled control from the bulls, we continue to suggest that traders remain in long positions. To manage risks, a stop-loss can be set below the 1,766.50-pt mark, in line with our long recommendation of 1,812 pts – also the closing level of 27 Aug.

Immediate support is set at 1,766.5 pts, or 31 Jul’s low. The second support is at 1,740 pts, the low of 20 Jul. Towards the upside, the immediate resistance is at 1,810.5 pts, the highs of 9 and 10 Aug. This is followed by 1,828 pts, the high of 29 Aug.

Source: RHB Securities Research - 9 Oct 2018