Maintain long positions as bulls are emerging. The FKLI formed a white candle yesterday, oscillating between a low and high of 1,706.5 pts and 1,717 pts, before closing 11.5 pts higher at 1,715.5 pts. The positive session can be seen as the continuation of the “Piercing Line” price reversal formation that appeared on 25 Oct. This rebound was triggered after the index retraced sharply and its daily RSI reached an oversold threshold, after being rejected from the 200-day SMA line on 10 Oct. For now, this positive bias remains in place, as long as the YTD low of 1,655 pts is not breached towards the downside. Hence, we maintain our positive trading bias.

As the bias for the index to extend its rebound is still in place, we continue to recommend that traders stay in long positions – which we initiated at 1,718 pts or 2 Nov’s closing level. For risk management purposes, a stop-loss can be placed at 1,655 pts.

Towards the downside, the immediate support is set at the 1,655-pt level, the low of 28 June. The following support is at the 1,600-pt mark. Towards the upside, 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 - 8 Nov 2018