Sharp negative intraday price reversal from 1,400-pt resistance; maintain short positions. The FKLI underwent a negative intraday price reversal to close 9 pts lower at 1,386.5 pts yesterday – after it tested the immediate resistance of 1,400 pts with a high of 1,402 pts. This was the index’s second failed attempt to cross above the immediate resistance over the past week. This suggests that the bulls still lack the strength to end the index’s ongoing correction phase, which has been in development following 21 Apr’s “Shooting Star” formation. All in, we still believe the risks are tilted towards the downside, as the correction is likely extending. We maintain our negative trading bias.

As the bulls failed to nullify the case for a further correction, 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 pegged at 1,380 pts, the price point of 13 May. 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 - 15 May 2020