Maintain short positions as the retracement leg is still developing. The FKLI managed to reverse its earlier session’s losses in the latest trade. At the closing, it settled 5 pts higher at 1,673 pts – the low and high were registered at 1,664 pts and 1,674 pts. However, the positive session did produce sufficient technical evidence to suggest the retracement leg, which started from the failed attempt to breach above the 1,700-pt immediate resistance on 2 Jul, has reached an end. Lending support to this view is the fact that the index is still capped by the 200-day SMA line. Hence, we keep to our negative trading bias.

As the risk is still high for the index to extend its retracement leg, we continue to recommend traders to stay in short positions. We initiated these positions at 1,668, the closing level of 12 Jul. For risk management purposes, a stop-loss can be placed above 1,700-pt mark.

Towards the downside, we are expecting the immediate support to emerge at 1,633.5 pts, the low of 17 Jun. This is followed by 1,613 pts, the high of 13 May. Moving up, the immediate resistance is set at 1,700 pts, followed by 1,730 pts, near the high of 21 Feb.

Source: RHB Securities Research - 16 Jul 2019