Stay short, as the index is nearing the resistance wall again. The FKLI traded in a wide range of between 1,366.5 pts and 1,397 pts, as it reversed from an intraday loss to settle 17 pts higher at 1,395.5 pts. Even with the strong performance, it was still capped by the 1,400-pt resistance point. This implies the correction phase – which has been in effect for a third week, following 21 Apr’s “Shooting Star” formation – is still in place, and may still be extending. This phase kicked in following a relatively sharp rebound between mid-March and 21 Apr. Towards the downside, the index could retrace towards the 1,300-1,350pt area, if the 50-day SMA line is breached. We maintain our negative trading bias.

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.

The immediate support is revised to 1,380 pts, the price point of the latest session. This is followed by 1,359 pts, the low of 4 May. Towards the upside, 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 - 14 May 2020