Maintain long positions, with a stop-loss set below the 1,655-pt support. The FKLI ended lower to form a black candle last Friday. It dropped 11 pts to close at 1,709 pts, off the session’s high of 1,720 pts and low of 1,704.50 pts. However, the appearance of last Friday’s black candle indicates a result of profit-taking activities following the recent gains. On a technical basis, the bullish sentiment stays intact. This is as long as the index does not close below the 1,655-pt support mentioned previously. Overall, we think that the rebound – which started from 25 Oct’s “Piercing Line” pattern – may persist.

As seen in the chart, we are eyeing the immediate support level at 1,655 pts, ie the previous low of 28 June. Meanwhile, the next support is seen at the 1,600-pt psychological mark. On the other hand, the immediate resistance is seen at 1,749.50 pts, which was the high of 17 Oct. The next resistance would likely be at 1,779 pts, obtained from the high of 10 Oct’s long black candle.

Hence, we advise traders to maintain long positions, in line with our initial recommendation to have long positions above the 1,718-pt level on 5 Nov. A stop-loss can be set below the 1,655-pt threshold in order to limit the downside risk.

Source: RHB Securities Research - 12 Nov 2018