Maintain short positions as the negative trend has not shown signs of reaching an end yet. The FKLI staged an intraday reversal in the latest session. It rebounded from a low of 1,621 pts (posted in the earlier part of the session) to a high of 1,636 pts, before closing 6 pts higher at 1,635 pts. Despite the positive intraday reversal, based on the daily chart, there is not enough technical data to indicate that the retracement leg has ended. The leg started from the failed attempt to cross above the 1,700-pt level on 2 Jul. Also, the index is still capped by the 50-day SMA line. Hence, we keep to our negative trading bias.

Since the negative bias is still not showing signs of reaching – at the minimum – an interim low, we continue to recommend that traders remain in short positions. We initiated these at 1,668 pts, the closing level of 12 Jul. To manage risks, a stop-loss can be placed above the 1,660.50-pt mark.

Towards the downside, immediate support is pegged at 1,613 pts, the high of 13 May. This is followed by 1,573 pts, the low of 14 May. Moving up, the immediate resistance is set at 1,660.50 pts, the high of 24 Jul – followed by 1,700 pts, a round figure.

Source: RHB Securities Research - 2 Aug 2019