Pending confirmation of a deeper rebound, maintain short positions. The FKLI closed relatively flat yesterday, easing just 0.5 pts to settle at 1,704.5 pts. The session’s low and high were 1,701 pts and 1,713.5 pts. The neutral session failed to produce the required price confirmation of a deeper rebound possibly developing, at this juncture. As we have mentioned in previous reports, for a deeper rebound to develop, the “Piercing Line” formation – as labelled in the chart – needs to be confirmed by an upside breach of the immediate resistance of 1,718 pts. Until this happens, the negative bias that was set off by the rejection from the 200-day SMA line on 10 Oct remains in place.

As there is no clear signal that the bulls are ready to reverse the weak bias, we still recommend that traders keep to short positions – which we initiated at 1,737 pts, or 10 Oct’s closing level. To manage risks, a stop loss can be placed at the latest session’s high, ie 1,718 pts.

Immediate support remains at the 1,655-pt level, the low of 28 June. This is followed by the 1,600-pt mark. Conversely, the immediate resistance is expected at 1,718 pts, the low of the 22 Oct “Piercing Line” formation. This is followed by 1,749.5 pts, or the high of 17 Oct.

Source: RHB Securities Research - 2 Nov 2018