Bulls taking control; initiate long positions. The FKLI formed a white candle on Friday, and closed at its previous immediate resistance of 1,718 pts, indicating a gain of 13.5 pts. The low and high of the day were at 1,706 pts and 1,723 pts. As mentioned in previous reports, a deeper rebound may develop if the FKLI manages to recapture the said previous immediate resistance – which will confirm the “Piercing Line” price reversal formation that appeared on 25 Oct. The deeper rebound was triggered after it experienced a sharp rejection from the 200-day SMA line, which sent its daily RSI reading into an oversold level. On this, we switch our trading bias to positive.

Our previous short positions, initiated at 1,737 pts or 10 Oct’s closing level, were closed out at the latest session at 1,718 pts. As the index is now likely to pose a deeper rebound, we initiate long positions at the latest closing level. For risk management purposes, a stop-loss can be placed at 1,655 pts.

We maintain the immediate support 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 now expected at 1,749.5 pts, or the high of 17 Oct. This is followed by 1,779 pts, the high of 10 Oct.

Source: RHB Securities Research - 5 Nov 2018