Maintain long positions as the rebound is probably taking a pause. The FKLI ended its streak of five consecutive positive sessions on Tuesday, easing 5.5 pts to close at 1,644 pts. The low and high were posted at 1,641.5 pts and 1,653 pts. While we continue to regard the upward move that started from the low of 14 May’s “Piercing Line” formation as a counter-trend rebound, the latest negative price action is not sufficient to signal its completion. Instead, we regard it as a possible indication of a minor pause after the recent sharp gains. Additionally, the index is still trading comfortably above the 50-day SMA line. We maintain our positive trading bias.

Given that the latest weakness is not sufficient to mark the end of the counter-trend rebound, 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 expected to emerge at 1,613 pts, the high of 13 May. This is followed by 1,573 pts, or the low of 14 May. On the other hand, the immediate resistance is now eyed 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 - 7 Jun 2019