Maintain short positions as the retracement leg is extending. The FKLI experienced a weak session – at the closing the index fell 7.5 pts to settle at 1,651.5 pts. Intraday tone was negative as it generally moved lower for the entire session, with the high and low registered at 1,660 pts and 1,650 pts. The retracement leg that started from the failed attempt to breach above the 1,700-pt immediate resistance on 2 Jul is still developing. Towards the downside, the index is now sliding towards the support zone that consists of the 50-day SMA line, and the immediate support of 1,633.5 pts – price actions around this zone are important in defining the index’s next directional bias. For now, we maintain our negative trading bias.

In the absence of price reversal signals, 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.

The immediate support is set at 1,633.5 pts, the low of 17 Jun. This is followed by 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 - 19 Jul 2019