Maintain short positions, as the trend remains negative. The FKLI gained 4.5 pts to close at 1,600.5 pts – this was after it reached a low and high of 1,597.5 pts and 1,607.5 pts. We consider the index’s price actions – since the emergence of the “Piercing Line” formation on 14 May – as still a minor rebound within the downtrend, which started from the failed attempt to breach above the 1,729-pt level. For now, this bias should remain, provided the FKLI is still capped by the downtrend line (as drawn in the chart) and 1,646-pt level (the trailing-stop for our ongoing short positions). We maintain our negative trading bias.

In the absence of a confirmation that the bulls are ready to post a stronger rebound, we recommend traders stay in short positions. These were initiated at 1,698 pts, or the closing level of 1 Mar. To manage the risks, a stop-loss can be placed above the 1,646-pt threshold.

Towards the downside, the immediate support is set at 1,550 pts. Breaking this may see market test the 1,500-pt psychological level. Towards the upside, the immediate resistance is pegged at 1,656.5 pts, ie the high of 26 Mar. This is followed by 1,694.5 pts, which was the high of 19 Mar.

Source: RHB Securities Research - 21 May 2019