Maintain long positions if the low of the “Piercing Line” formation is not invalidated. The FKLI formed a black candle yesterday, and generally trended lower for the entire session. The high and low was at 1,706.5 pts and 1,680 pts, and the index closed 21.5 pts lower at 1,684 pts. While this has negated the previous positive session, the bigger picture indicates that the bias for the index to rebound higher is not invalidated yet. This bias should stay in place if the “Piercing Line” – which appeared on 25 Oct – is not breached. This rebound was triggered after the index underwent a relatively sharp retracement between early September and the third week of October, when the daily RSI moved past the oversold threshold. Hence, we maintain our positive trading bias.

As the bias for the extension of the rebound phase is still not negated, we still recommend that traders stay in long positions – which we initiated at 1,718 pts, or 2 Nov’s closing level. To manage risks, a stop-loss can be placed at 1,655 pts.

Towards the downside, immediate support is maintained at the 1,655-pt level, the low of 28 June. The second support is set at the 1,600-pt mark. On the other hand, the immediate resistance is now 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 - 28 Nov 2018