Bulls still lacking the strength; maintain short positions. The FKLI ended the latest session 4.5 pts lower to settle at 1,694.5 pts, with the session’s low and high recorded at 1,689.5 pts and 1,696.5 pts. The negative session happened after the index came close to testing the immediate resistance of 1,703 pts in the prior session – this suggests the bulls are still lack the strength to breach above this resistance mark. To recap, a firm breach of the said resistance (which would also confirm a valid upside breach of the 50-day SMA line) is needed to signal the extension of the index’s rebound that started from the low of 1,631.5 pts on 18 Dec 2018. Pending such confirmation, we keep to our negative trading bias.

With the bulls still unable to show firm control over the index, traders should remain in 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.

Towards the downside, the immediate support is expected at 1,631.5 pts, the low of 18 Dec. While the second support is pegged 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 - 24 Jan 2019