Maintain short position. The FKLI formed a white candle in the latest trading despite registering a decline. This is as the index initially plunged to a low of 1,712 pts, before it rebounding sharply to settle at 1,730.5 pts, indicating a decline of 5 pts. The high was posted at 1,731.5 pts. As mentioned, as long as the index is not able to cross the immediate resistance of 1,740 pts decisively, the overall negative tone would still be in place. Additionally, price actions from the low of 1,686 pts on 11 Oct can be seen as a consolidation phase, after the index experienced a sharp price rejection from the 200-day SMA line on 5 Oct, which saw the RSI cross the oversold threshold. Hence, we keep to our negative trading bias.

As the negative bias is still showing signs of development, we continue to recommend that traders keep to short positions – which we initiated at 1,737 pts, or 10 Oct’s closing level. For risk management purposes, a stop loss can be placed above 1,779 pts.

We retain the immediate support at 1,686 pts, the low of 11 Oct. This is followed by 1,655-pt level, the low of 28 June. On the other hand, 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 - 22 Oct 2018