Maintain long positions, as the index may still be in a rebound. The FKLI closed 2 pts higher last Friday to settle at 1,694 pts, after swinging between a low and high of 1,688.5 pts and 1,697 pts. The past week’s price actions are indicative of a directionless market. Nevertheless, as long as the low of the “Piercing Line” formation that emerged on 25 Oct is not breached, the bias for the index to extend its rebound is still valid. Towards the upside, we expect it to, at minimum, test the immediate resistance of 1,749.5 pts. This rebound phase set in after the index retraced sharply after breaching the 200-day SMA line on 3 Oct – which saw its daily RSI reaching an oversold level in the third week of October. Hence, we maintain our positive trading bias.

As the FKLI could extend its rebound phase, 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, immediate support is expected 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 - 26 Nov 2018