Maintain short positions. The FKLI gained 2.5 pts to settle at 1,640 pts. This was after it swung between 1,633.5 pts and 1,644 pts. Still, the index’s price actions since the appearance of 18 Apr’s “Hammer” formation – on the back of its multi-week retracement that kicked in after the failed attempt to cross above the 1,729-pt level – continued to resemble a minor technical rebound. For now, the index remains unable to crack above the downtrend line (as drawn in the chart), in a decisive manner, to signal a deeper rebound is possibly developing. Based on these observations, we keep to our negative trading bias.

As there are no clear signals to suggest a stronger rebound is in the process of developing, traders should remain in short positions. These were initiated at 1,698 pts, the closing level of 1 Mar. To manage risks, a stop-loss can be placed above 1,646 pts.

Towards the downside, immediate support to emerge at 1,600 pts, followed by 1,550 pts. On the other hand, the immediate resistance is pegged at 1,656.5 pts, or the high of 26 Mar. This is followed by 1,694.5 pts, the high of 19 Mar.

Source: RHB Securities Research - 2 May 2019