Maintain short positions on risk of a further retracement. The FKLI rebounded from its intraday low of 1,369.5 pts to close at 1,378.5 pts yesterday, indicating a 3-pt decline. The weak session can be seen as a continuation from the index’s failed attempt to cross above the 1,400-pt resistance mark last week. A firm downward breach of the 50-day SMA line can be seen as a negative price signal, as it will likely mean that the correction phase that started from 21 Apr’s “Shooting Star” formation is extending. All in, we believe the FKLI is developing a correction phase, following a relatively sharp rebound that took place between mid-March and mid-April. We maintain our negative trading bias.

As the correction is incomplete, traders should remain in short positions. These were initiated at 1,370 pts, the closing level of 21 Apr. To manage risks, a stop-loss can be placed above 1,410 pts.

We maintain immediate support target at 1,359 pts, the low of 4 May, followed by 1,340 pts. Conversely, the immediate resistance is set at 1,400 pts. This is followed by 1,416.5 pts, the high of 4 May.

Source: RHB Securities Research - 12 May 2020