Downside risks are still high; maintain short positions. The FKLI eased 3.5 pts to settle at 1,669.5 pts yesterday, after oscillating between a low and high of 1,665.5 pts and 1,673 pts. Broadly, the weak session suggests that the index’s retracement phase – which started from the failed attempt to push above the 1,700-pt immediate resistance mark on 2 Jul – is still in place. For now, as long as the index is still capped by the 200-day SMA line, the retracement may extend further. We maintain our negative trading bias.

In the absence of positive price signals to suggest that the weak bias has ended, we continue to recommend that traders remain in short positions. We initiated these at 1,668, the closing level of 12 Jul. To manage risks, a stop-loss can be placed above the 1,700-pt mark.

We continue to expect the immediate support to emerge at 1,633.5 pts, the low of 17 Jun. Breaking this may see the market slide towards 1,613 pts, the high of 13 May. On the other hand, the immediate resistance is set at 1,700 pts, followed by 1,730 pts, near the high of 21 Feb.

Source: RHB Securities Research - 17 Jul 2019