Maintain long positions if the low of the “Piercing Line” formation holds. The FKLI closed lower yesterday, and, during the intraday, breached the lower boundary of the supposed “Symmetrical Triangle” formation. This invalidates the said pattern. For the intraday, it posted a low and high of 1,673 pts and 1,683.5 pts. The index closed at 1,680.5 pts, indicating a decline of 8 pts. While the formation of the consolidation is no longer valid, for the risk of the multi-month retracement to resume, the low of the “Piercing Line” formation which appeared on 25 Oct should be breached. Until this happens, we maintain our positive trading bias.

As there is no clear price signal that suggests the multi-month weak trend is resuming, we recommend that traders stay in long positions, initiated at 1,718 pts, or 2 Nov’s closing level. To manage risks, we revise the stop-loss to 1,665 pts, the low of the “Piercing Line”.

Towards the downside, 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. Moving up, 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 - 7 Dec 2018