Maintain short positions on the expectation of a further retracement. The FKLI closed in a fairly neutral position yesterday, after trading sideways between 1,677 pts and 1,684 pts. It gained 3.5 pts to close at 1,679.5 pts. We consider the latest session as part of the index’s ongoing consolidation phase around the 50-day SMA line – which set in after 2 Jan’s black candle. Towards the downside, provided the index is still not able to breach above the said SMA line, chances are high that it will retest the immediate support. Hence, we maintain our negative trading bias.

As there are no signs that the bulls are ready to take over the index’s direction, we continue to recommend that traders maintain short positions. We initiated these at 1,664.5 pts, the closing level of 2 Jan. To manage risks, a stop-loss can be placed above 1,703 pts.

Immediate support is still pegged at 1,631.5 pts, the low of 18 Dec. The second support is set at the 1,600-pt mark. Moving up, the immediate resistance is set 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 - 16 Jan 2019