Initiate long positions as the index has signalled a possible rebound. The FKLI formed an “Upside Gap”. At the closing, it crossed above the 1,558-pt threshold – this suggests the retracement that resumed on 2 Jul on the failed attempt to cross above the 1,700-pt level, has reached an end. The session’s low and high were posted at 1,563 pts and 1,568 pts, before closing 7 pts higher at 1,565 pts. This implies there is a good possibility that the index could develop a counter-trend rebound. This came after the index tested 1,550 pts twice recently on the back of the RSI, which was near to the oversold threshold. Switch our trading bias to positive.

Our previous short positions initiated at 1,668 pts, the closing level of 12 Jul were closed out at the 1,558-pt level in the latest session. On the bias that a possible counter-trend rebound is developing, we initiate long positions at the latest closing. For risk management purposes, a stop-loss can be set below 1,547.5 pts.

We revised the immediate support slightly lower to 1,547.5 pts, which was the low of 10 Oct, followed by 1,500 pts. Meanwhile, the immediate resistance target is pegged at 1,573, the low of 14 May. This is followed by the 1,600-pt level.

Source: RHB Securities Research - 15 Oct 2019