Maintain long positions as the rebound is still showing progress. The FKLI continued to extend its rebound in the latest session. At one point, it came close to the immediate resistance of 1,646 pts with an intraday high of 1,644 pts, before closing 4.5 pts higher at 1,641.5 pts. Overall, the index’s counter-trend rebound that started from 14 May’s “Piercing Line” formation’s low of 1,573 pts is showing good signs of progressing. This rebound phase is meant to correct its prior multi-month’s retracement. The Daily RSI reading of 59 suggests the said rebound has still not reached the overbought threshold yet. We maintain our positive trading bias.

Given that the index is still showing positive price action above both the downtrend (as drawn in the chart) and the 50- day SMA lines, we continue to recommend that traders remain in long positions, which were initiated at 1,619.5 pts. A stop-loss can now be placed at the breakeven level.

Immediate support is still pegged at 1,573 pts, the low of 14 May. This is followed by 1,550 pts. Moving up, the immediate resistance is expected to emerge at 1,646 pts, the high of 7 May. This is followed by 1,656.5 pts, the high of 26 Mar.

Source: RHB Securities Research - 3 Jun 2019