Initiate long positions above the 1,677-pt level. The FKLI ended higher and leave an upside gap yesterday. It gained 9 pts to close at 1,680 pts, off its high of 1,687.50 pts. Technically speaking, the index has closed above the downtrend line drawn in the chart and the 21-day SMA line, implying that the sentiment is turning positive. The latest candle has also sent the index to its highest point in more than two weeks, enhancing the positive sentiment. Yesterday’s closing also triggered our stop-loss, which we had previously recommended at the 1,676- pt threshold.

Currently, the immediate support level is seen at 1,677 pts, set near the high of 26 Dec. If price breaks down, the next support is seen at 1,631.50 pts, which was the previous low of 18 Dec. Towards the upside, we are eyeing the immediate resistance level at 1,706.50 pts, ie the high of 27 Nov’s long black candle. The next resistance would likely be at 1,729 pts, obtained from the previous high of 8 Nov.

Thus, we advise traders to initiate long positions above the 1,677-pt level. At the same time, a stop-loss is advisable to set below the 1,631.50-pt threshold in order to minimise the downside risk.

Source: RHB Securities Research - 28 Dec 2018