Maintain short positions as the chances of a deeper retracement developing are still high. The FKLI formed a white candle in the latest session – as it generally moved higher throughout the session, after a weak opening. The session’s low and high were at 1,664 pts and 1,682.5 pts, before it ended 17 pts higher at 1,681.50 pts. Nevertheless, the positive session failed to negate the prior session’s black candle. At the same time, the index remained limited by the 50-day SMA line – which indicates the risk of it trending lower to retest the immediate support of 1,631.5 pts is still high. Hence, we keep to our negative trading bias.

As the risk for a further retracement is still high, we continue to recommend that traders maintain short positions. We initiated these positions at 1,664.5 pts, the closing level of 2 Jan. For risk management purposes, a stop-loss can be placed above 1,703 pts.

Immediate support is at 1,631.5 pts, the low of 18 Dec. The second support is pegged at the 1,600-pts mark. Conversely, 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 - 4 Jan 2019