Maintain short positions until end of the retracement leg is confirmed. The FKLI added 6.5 pts to close at 1,658 pts last Friday, trading between 1,653.5 pts and 1,663.5 pts. The positive session took place after the index came close to a support zone that consisted of the 50-day SMA line and the immediate support of 1,633.5 pts. Nevertheless, based on the daily chart, there was no evidence to indicate the retracement leg that started from the failed attempt to breach above the 1,700-pt immediate resistance on 2 Jul has ended. As such, we keep to our negative trading bias.

Until clearer signals emerge that suggest the bulls are ready to drive the index again, 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.

Towards the downside, 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. 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 - 22 Jul 2019