Maintain short positions as chances are high for the index to retrace further. The FKLI closed the latest session 3 pts higher at 1,689,5 pts, this was after it swung between 1,688 pts and 1,694.5 pts. Still the positive session has not negated the overall negative bias that started from the emergence of the “Bearish Engulfing” formation on 29 Jan. We also observed that while the index is still holding above the 50-day SMA line, there is no firm price evidence to suggest it is ready to post a reversal. The daily RSI reading, which is showing signs of waning, also points to a lack of momentum. Based on these technicalities, we maintain our negative trading bias.

With no signs to suggest that the bulls have regained control at around the 50-day SMA line, 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.

We still peg the immediate support at 1,631.5 pts, the low of 18 Dec 2018. Breaking this may see it fall back to the 1,600-pt mark. Conversely, 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 - 19 Feb 2019