Maintain long positions as the rebound is still showing good progress. The FKLI continued to extend its countertrend rebound in the latest session, which, at one point, saw it test the immediate resistance of 1,573 pts, with an intraday high of 1,575 pts, before closing 5 pts higher at 1,572 pts. The positive session sent the index into an important resistance zone, which comprised the said immediate resistance and 1,585 pts (located near the lower bound of the sideways move that developed between mid-August and early-October). A firm breakaway from this zone would open the space for an even stronger countertrend rebound to develop, and vice versa, a price rejection from this zone could potentially invalidate our current positive trading bias.     

As the bulls are still showing strength in driving the rebound, we continue to recommend that traders stay in long positions. We initiated these at 1,565 pts, which was the closing level of 14 Oct. For risk management purposes, a stop-loss can be set below 1,547.5 pts.  

The immediate support is still pegged at 1,547.5 pts, which was the low of 10 Oct, followed by 1,500 pts. On the other hand, the immediate resistance target is set at 1,573, the low of 14 May. This is followed by 1,585 pts, a level near the lower bound of the sideways move which developed between mid-August and early-October.

Source: RHB Securities Research - 17 Oct 2019