Looking towards a further retracement; maintain short positions. The FKLI oscillated between positive and negative territory yesterday, and marked a low and high of 1,679 pts and 1,686 pts before shedding 1 pt to close at 1,684.5 pts. It has been trading sideways around the 50-day SMA line in recent sessions. A downside breach from this line could lead to a deeper retracement. Overall, the bearish bias that started from the 29 Jan’s “Bearish Engulfing” formation is still firmly in place – and rationalises our short bias.

As the weak price actions around the said SMA line indicates that the bulls are absent, 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 paced above 1,706 pts.

Towards the downside, immediate support is expected at 1,631.5 pts, the low of 18 Dec 2018. The second support is at the 1,600-pt mark. Moving up, the immediate resistance is set 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 - 15 Feb 2019