Maintain short positions. The FKLI ended the latest session on a positive note. It settled at 1,689 pts, indicating a gain of 14 pts. The session saw the index oscillated between a low and high of 1,679.5 pts and 1,692.5 pts. We observe that despite the appearance of the bullish “Piercing Line” formation on 25 Oct, the index’s performance since then has not been clear to indicate a possible deeper rebound or total trend reversal is in the process of developing. This suggests the negative bias that set in after the index experienced a sharp price rejection from the 200-day SMA line on 10 Oct, is still firmly in place. This is despite the daily RSI reaching an oversold threshold recently. Until clearer evidence for a deeper rebound emerges, we keep to our negative trading bias.

As there is no conclusive price signal to suggest the weakening trend has reached an end, 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 1,749.5 pts

Towards the downside, the immediate support is expected at 1,655-pt level, the low of 28 June. The following support is at 1,600-pt mark, a round figure. Moving up, the immediate resistance is set at 1,749.5 pts, or the high of 17 Oct. This is followed by 1,779 pts, which was the high of 10 Oc

Source: RHB Securities Research - 30 Oct 2018