Maintain short positions as the rebound is still confined within the downtrend. The FKLI closed flat at 1,601.5 pts yesterday, as it managed to pull away from the negative territory registered in the earlier session – the low was at 1,590.5 pts. The current negative leg that started from the failed attempt to breach above the 1,729-pt level is still intact. The rebound that started from 14 May’s “Piercing Line” formation is still being viewed as just a minor rebound within the weak trend – to correct its prior multi-week’s sharp retracement. Until there are clearer signals that a stronger rebound is likely to develop, we are keeping our negative trading bias.

As the bulls are still not able to invalidate the said weak trend, we recommend that traders stay in short positions. These were initiated at 1,698 pts, 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, immediate support is at 1,550 pts. This is followed by the 1,500-pt psychological level. Conversely, the immediate resistance is pegged at 1,656.5 pts, ie the high of 26 Mar. This is followed by 1,694.5 pts, the high of 19 Mar.

Source: RHB Securities Research - 24 May 2019