Sentiment remains negative; stay short. The FKLI ended higher to form another white candle yesterday. It gained 8 pts to close at 1,677 pts, after oscillating between a high of 1,679 pts and low of 1,667.50 pts. Still, the appearance of 12-13 Mar white candles indicate that the market may be experiencing a technical rebound after the losses seen lately. As the index is still trading below the 50-day SMA line, this implies that the negative sentiment stays intact. Overall, we believe that the downside swing – which started from 26 Feb’s black candle – may continue.

As seen in the chart, the immediate resistance level is seen at 1,729 pts, determined from the high of 8 Nov 2018. The next resistance would likely be at 1,749.50 pts, which was the high of 17 Oct 2018. Towards the downside, we are eyeing the near-term support level at 1,631.50 pts, ie the low of 18 Dec 2018. This is followed by the 1,600-pt psychological mark.

Therefore, we advise traders to stay short, following our recommendation of initiating short below the 1,698-pt level on 4 Mar. In the meantime, a stop-loss is advisable to set above the 1,729-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 14 Mar 2019