Maintain short positions. The FKLI settled the latest session at the 1,400-pt resistance point – indicating a gain of 13.5 pts. While the index has been staging a rebound over the past week or so after it recently tested the 50-day SMA line, we still believe the index’s correction phase that started from 21 Apr’s “Shooting Star” formation is still incomplete. The said formation has in our view marked the top of the rebound that took place between 17 Mar and 21 Apr. Additionally, the RSI is still capped by the resistance line (as drawn in the chart). Hence, we are keeping our negative trading bias.

As the correction phase may still be extending, traders are advised to 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 are keeping the immediate support at 1,380 pts, the price point of 13 May. This is followed by 1,359 pts, the low of 4 May. On the other hand, the immediate resistance is still set at 1,400 pts. This is followed by 1,416.5 pts, the high of 4 May.

Source: RHB Securities Research - 18 May 2020