Bears testing the 50-day SMA line’ defence; stay in short positions. The FKLI was under the bears’ control in the latest session – it shed 4.5 pts to close at 1,683 pts. At one point, the bears tested the 50-day SMA line with an intraday low of 1,678 pts, while the high was at 1,685 pts. While the index managed to end above the said SMA line, this has not changed the negative bias that started from the appearance of the 29 Jan’s “Bearish Engulfing” formation – this suggests the bias for the index to experience a deeper retracement is still firmly in place. A firm downside breach of the said SMA in the coming sessions would enhance the case for this negative bias. Hence, we maintain our negative trading bias.

As the bears are still showing signs to push the index down further, 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 1,706 pts.

The immediate support is still set at 1,631.5 pts, the low of 18 Dec 2018. The second support is at the1,600-pt mark. Moving up, 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 - 11 Feb 2019