Maintain short positions as there is still no reversal signal. The FKLI ended the latest session marginally lower. For the intraday, the index managed to rebound from the low of 1,681.5 pts to a high of 1,701 pts, before ending 2 pts higher to settle at 1,687 pts. The weak session meant that the “Piercing Line” formation on 25 Oct is still unconfirmed. This implies that there is no clear signal that the index is in the process of posting a deeper rebound. By extension, 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 of a deeper rebound emerges, we keep to our negative trading bias.

As the bulls are still not showing signs of emerging, 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 at the breakeven level.

The immediate support is set at the 1,655-pt level, the low of 28 June. The second support is at the 1,600-pt mark, a round figure. Towards the upside, 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 Oct.

Source: RHB Securities Research - 31 Oct 2018