Maintain short positions, as the correction phase is likely at its infancy. The FKLI significantly narrowed its losses last Friday, rebounding off the low of 1,514 pts – which is near the 200-day SMA line – to settle 7 pts lower, at 1,741.5 pts. The rebound off the session’s low did not suggest the index’s correction phase that started from the high of 1,586.5 pts has reached an end. Instead it can be regarded as just a normal price reaction from an important support level. We believe the index’s correction phase is likely in still in the early stage of development. Premised on this, we are maintaining our negative trading bias.

As the bias is tilted towards the downside, we advise traders to stay in short positons. We initiated these at 1,548.5 pts – the closing level of 11 Jun. To manage risks, a stop-loss can be placed above 1,586.5 pts.

We are keeping the immediate support at 1,530 pts, the price point of 3 Jun. This is followed by 1,515 pts, near the 200- day SMA line. Moving up, the immediate resistance is still pegged at 1,565 pts, the price point of 11 Jun, then 1,586.5 pts – the high of 9 Jun.

Source: RHB Securities Research - 15 Jun 2020