Bearish sentiment remains intact; maintain short positions. The FKLI’s downward momentum continued as expected after it ended lower and formed a long black candle yesterday. It plunged 19 pts to settle at 1,662 pts, off the session’s high of 1,687.50 pts. Technically, investor sentiment remains bearish, since the index has marked a lower close vis-à-vis the previous sessions since 19 Mar. Meanwhile, the 14-day RSI indicator deteriorated to a weaker reading at 39.04 pts, the bearish sentiment has been enhanced. Overall, we keep our bearish view on the FKLI’s outlook.

Based on the daily chart, we are eyeing the immediate resistance level at 1,729 pts, ie the high of 8 Nov 2018. The next resistance is anticipated at 1,749.50 pts, obtained from the high of 17 Oct 2018. Towards the downside, the immediate support level is seen at 1,631.50 pts, which was the previous low of 18 Dec 2018. If a breakdown arises, the next resistance is maintained at the 1,600-pt psychological spot.

Hence, we advise traders to maintain short positions, in line with our initial recommendation to have short positions below the 1,698-pt level on 4 Mar. A stop-loss can be set above the 1,729-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 22 Mar 2019