Stay in short positions until bulls are ready to take over the control. The FKLI posted a slight gain of 2 pts to close at 1,604.5 pts – the low and high were posted at 1,595 pts and 1,610 pts. The positive session can be seen as a follow through from the prior session’s “Piercing Line” formation. However, based on the daily chart, the index’s weak bias that started from the failed attempt to cross above the 1,729-pt level is still firmly in place. Based on the current technical picture, the index has to cross above the 1,646-pt (trailing stop for our ongoing short positions) and downtrend lines (as drawn in the chart) to signal a possible change in the bias. Until this happens, we are keeping to our negative trading bias.

Pending a clearer signal that the bulls have wrestled control from the bears, we recommend that traders stay 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, the immediate support is still expected at 1,550 pts, followed by 1,500 pts. Moving up, the immediate resistance is now set at 1,656.5 pts, the high of 26 Mar. This is followed by 1,694.5 pts, the high of 19 Mar.

Source: RHB Securities Research - 16 May 2019