Maintain short positions as the negative bias is developing. The FKLI formed a downside gap in the latest session to end 31 pts lower, at 1,706 pts. The low and high were at 1,686 pts and 1,708.5 pts. The weak session was an extension of the prior session’s price rejection from the 200-day SMA line. While the rebound from the intraday low formed a “Long Legged Doji” formation, which led the index to close above the 1,700-pt mark, it was not enough to suggest that a deeper rebound may be developing. Hence, we maintain our near-term negative trading bias.

As the negative bias is not showing any sign of ending, we continue to recommend that traders keep to short positions – which we initiated at 1,737 pts, 10 Oct’s closing level. For risk management purposes, a stop loss can be placed above 1,779 pts.

We revised the immediate support to 1,686 pts, the latest session’s low. This is followed by 1,655 pts, which was the low of 28 June. On the other hand, the immediate resistance is eyed at 1,766.5 pts, or 31 Jul’s low. This is followed by 1,779 pts – the latest session’s high.

Source: RHB Securities Research - 12 Oct 2018