Maintain long positions. The FKLI ended the latest session on a weak note. It fell 6.5 pts to close at 1,569.5 pts – the low and high were recorded at 1,567 pts and 1,577 pts. Despite closing below the resistance zone of 1,573-1,585 pts and the emergence of the “Bearish Engulfing” formation on 18 Oct, the countertrend rebound is still considered as valid. The latest three sessions’ price actions suggest a minor consolidation phase is taking place below the said resistance zone. This countertrend rebound is meant to correct the index’s previous retracement which took place between early July and mid-October. We maintain our positive trading bias.

On the expectation that the countertrend rebound still has the potential to extend, traders are advised to remain in long positions. We initiated these at 1,565 pts, the closing level of 14 Oct. To manage risks, a stop loss can be set below 1,547.5 pts.

Immediate support is set 1,547.5 pts, the low of 10 Oct, followed by 1,500 pts. Toward the upside, the immediate resistance is at 1,585 pts, near the lower boundary of the sideways move that developed between mid-August and early October. This is followed by the 1,600-pt mark.

Source: RHB Securities Research - 24 Oct 2019