Maintain long positions as the weak session was likely due to profit-taking. The FKLI closed 10 pts weaker at 1,438.5 pts last Friday, after it narrowed losses from an early low of 1,427.5 pts. We view that the weak session as just an indication of profit-taking activity. It has not resulted in any technical damage to the index’s rebound, which recently resumed after almost a month of consolidation at around the 50-day SMA line. Additionally, the RSI reading of 61.6 is still pointing to a non-overbought condition. We maintain our positive trading bias.

With no price reversal signal in sight, we advise traders to stay in long positions. We initiated these at 1,421.5 pts, the closing level of 19 May. To manage risks, a stop-loss can now be placed at the breakeven point.

We maintain the immediate support at 1,425 pts, the high of 20 Apr, followed by 1,415 pts, the high of 18 May. Conversely, the immediate resistance is eyed at 1,454 pts – the high of 9 Mar, followed by 1,466.5 pts – the “Downside Gap” of 6 Mar.

Source: RHB Securities Research - 27 May 2020