Maintain short positions as the retracement leg has not reached an end yet. The FKLI formed a black candle yesterday – which, at the closing, cut through the previous immediate support of 1,613 pts. It closed at the session’s low of 1,603.5 pts, indicating a decline of 15 pts. The high was posted at 1,616.5 pts. While we note that the Daily RSI is flashing out an oversold reading, the absence of a price reversal leads us to believe that the weak bias that started from the failed attempt to breach above the 1,700-pt resistance mark on 2 Jul remains valid. As such, we maintain our negative trading bias.

As the bears continue to pressure the index downwards, investors should 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, the immediate support is now pegged at 1,573 pts, the low of 14 May. This is followed by 1,550 pts. On the other hand, 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 - 6 Aug 2019