Maintain short positions given the risk of further retracement is still high. The index ended the latest session indecisively. It closed slightly higher by 1.5 pts to settle at 1,687.5 pts. Intraday, the movements were confined in the narrow sideway zone of 1,686 pts and 1,692 pts. Overall, we believe the bearish bias that set in by the 29 Jan’s “Bearish Engulfing” formation is firmly in place and that the index may still retrace further in the coming sessions. Towards the downside, a downside breach of the 50-day SMA line could further enhance the negative bias. Based on these observations, we maintain our negative trading bias.

With no indication to suggest the bearish bias has reached an end, 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, the stoploss can be placed at above 1,706 pts.

Towards the downside, the immediate support is pegged at 1,631.5 pts, the low of 18 Dec 2018. This is followed by the 1,600-pt mark. On the other hand, the immediate resistance is eyed at 1,706 pts, the high of the 28 Jan’s “Bearish Engulfing” formation. This is followed by 1,729 pts, the high of 8 Nov.

Source: RHB Securities Research - 8 Feb 2019