Maintain short positions as the bears are testing the immediate support. The FKLI performed negatively in the latest session and invalidated 7 Sep’s “Bullish Harami” formation. At the closing, the index settled at the immediate support level of 1,573 pts, indicating a drop of 15 pts. The trading range was between 1,571 pts and 1,585 pts. The breakdown from the previous 1.5-month sideways move and the invalidation of the said “Bullish Harami” indicate that the index’s weak bias is still firmly in place. Both the declining 50-day and 200-day SMA lines are also pointing towards the bearish trend. We maintain our negative bias.

With no price signal to suggest the weak trend has reached an end, traders are advised to remain 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 1,589-pt level, the high of the previous session.

Immediate support is set at 1,573 pts, 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, the high of 9 Aug. This is followed by the 1,660.5-pt mark, the high of 24 Jul.

Source: RHB Securities Research - 3 Oct 2019