Maintain long positions, pending a possible breakout from the “Symmetrical Triangle” consolidation. The FKLI formed a black candle last Friday. The intraday tone was negative, as the index generally moved lower for the entire session. The high and low were at 1,701.5 pts and 1,680 pts, before the index closed at 1,684.5 pts, indicating a gain of 9.5 pts. The negative session tested the lower bound of a possible “Symmetrical Triangle” pattern, which has been taking shape over the past three weeks. As mentioned before, the index needs to breach above the downtrend line of the said formation to signal that the bias for a deeper rebound is developing. If this happen, the index could, at the very least, test the immediate resistance of 1,749.5 pts. Hence, we maintain our positive trading bias.

As the index has possibly completed the final phase of a multi-week “Symmetrical Triangle” consolidation – before a possible breakout, we 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 still pegged at the 1,655-pt level, the low of 28 June. The second support is at the 1,600-pt mark. Conversely, 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 - 3 Dec 2018