Bulls are retreating; initiate short positions. The FKLI ended the latest session in negative territory. At the closing, the index weakened 27 pts to settle at 1,664.5 pts. The intraday tone was negative, as it generally trended lower throughout the session, while the low and high were at 1,696.5 pts and 1,664 pts. Subsequently, a black candle which erased the previous sessions’ gains, while breaching the 50-day SMA line, was formed – which points to a possible price reversal. At the minimum, the index could retest the immediate support of 1,631.5 pts. Based on these observations, we switch our trading bias to negative.

Our previous long positions, initiated above the 1,677-pt level on 28 Dec, were closed out at 1,676.50 in the latest session. As the risk of the index retesting the said immediate support has risen, we initiate short positions at the latest closing level. For risk management purposes, a stop-loss can be placed above 1,703 pts.

We revised the immediate support to 1,631.5 pts, this was the low of 18 Dec. This is followed by 1,600-pts mark, a round figure. Moving up, the immediate resistance is now at 1,703 pts, the high of 31 Dec 2018. This is followed by 1,729 pts, the high of 8 Nov.

Source: RHB Securities Research - 3 Jan 2019