Maintain short positions. The FKLI gained 7.5 pts to settle at 1,736 pts yesterday. The session’s low and high were at 1,726 pts and 1,737 pts. Despite the positive performance, the index is still limited by the immediate resistance of 1,740 pts. As we see it, the bulls need to decisively breach above this resistance mark, in order for the index to have a better chance of reversing its current weak trend. Until this happens, the recent rebound from the low of 1,686 pts on 11 Oct will continue to be treated as a consolidation, which set in after the recent sharp price rejection from the 200-day SMA line. Hence, we maintain our negative trading bias.

With no price confirmation that a deeper rebound or total price reversal is developing, 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.

Immediate support is set at 1,686 pts, the low of 11 Oct. Breaking this may see the market test the1,655-pt level, the low of 28 June. Moving up, the immediate resistance is at 1,740 pts, or 20 Jul’s low. This is followed by 1,779 pts – the latest session’s high.

Source: RHB Securities Research - 17 Oct 2018