Lack of strength for a stronger rebound; maintain short positions. The FKLI experienced a weak session in the latest trade, which saw it falling back below the 1,600-pt round figure. It also came near to testing the immediate support of 1,573 pts. The session’s high and low were recorded at 1,601.5 pts and 1,578 pts, before closing at 1,578.5 pts – this indicated a decline of 19.5 pts. The inability of the index to hold above the 1,600-pt level indicates the bearish bias – which resumed on 2 Jul’s failed attempt to cross above the 1,700-pt level – remains firmly in place. Towards the downside, a firm breach of said immediate support may open the room for further weakness. As such, we keep to our negative trading bias.

With the bearish bias continuing to show signs of extending, traders are recommended to stay in short positions. We initiated these at 1,668 pts, or the closing level of 12 Jul. To manage risks, a stop-loss can now be placed above the 1,621.5-pt mark.

The immediate support is expected at 1,573 pts, ie the low of 14 May. This is followed by the 1,550-pt mark. On the other hand, the immediate resistance is set at 1,621.5 pts, or the high of 9 Aug. This is followed by 1,660.5 pts, ie the high of 24 Jul.

Source: RHB Securities Research - 4 Sept 2019