“Downside Gap” filled; maintain short positions. The FKLI crossed above the 50-day SMA line and filled the prior session’s “Downside Gap”. After hitting a low and high of 1,372 pts and 1,397.5 pts, it settled 26 pts higher at 1,386.5 pts. While the index has recaptured the SMA line, we believe the correction phase that started from 20 Apr’s “Shooting Star” formation is still incomplete. Additionally, the RSI is still capped by the resistance line (depicted in the chart). This correction phase set in following the sharp rebound that took place between the low of 1,171 pts on 17 Mar and the “Shooting Star” high of 1,425.5 pts. We maintain our negative trading bias.

As the correction could reach the 1,300-1,350pt area, traders should remain in short positions, initiated at 1,370 pts – the closing level of 21 Apr. To manage risks, a stop-loss can be placed above 1,410 pts.

The immediate support is revised to 1,359, the low of 4 May, followed by 1,340 pts. Towards the upside, the immediate resistance is now pegged at 1,400 pts. This is followed by 1,416.5 pts, the high of 4 May.

Source: RHB Securities Research - 6 May 2020