Countertrend rebound still in place; maintain long positions. The FKLI ended the latest session 4 pts weaker to settle at 1,566.5 pts – which was also the session’s low. However, the negative session did not flash out a price reversal signal that could mark an end to the index’s countertrend rebound, which started from the low of 1,547.5 pts on 10 Oct. Looking at the price actions over the past week, we are still convinced that the index is merely experiencing a minor pause around the lower bound of the resistance zone of 1,573-1,585 pts. Recall that we are of the view that this ongoing rebound phase is meant to correct its previous retracement phase, which took place between early July and mid-October. We maintain our positive trading bias.

In the absence of price signals to indicate the bulls have run out of steam, 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.

We are pegging the immediate support target at 1,547.5 pts, the low of 10 Oct, followed by 1,500 pts. Meanwhile, the immediate resistance is at 1,585 pts, near the lower boundary of the sideways move that developed between midAugust and early October. This is followed by the 1,600-pt mark.

Source: RHB Securities Research - 29 Oct 2019