Correction phase is kicking in; initiate short positions. The FKLI eased 24 pts to close at 1,566 pts yesterday. The intraday tone was negative, as it generally trended lower after hitting a high of 1,602 pts earlier in the session. The close level placed the index below the 1,590-pt support level, thereby confirming the price rejection from the 1,620-pt resistance mark. This implies chances are now high that the index has now entered a correction phase. Premised on this, we switch our trading bias to negative.

Our previous long positions – initiated at 1,530 pts, the closing level of 2 Jun – were closed out at 1,590 pts yesterday. Concurrently, we initiate short positions at the latest close. To manage risks, a stop-loss can be placed above 1,602 pts.

The immediate support is now at 1,550 pts, followed by 1,530 pts. Conversely, the immediate resistance is pegged at 1,585 pts, followed by 1,602 pts – both are derived from the latest candle.

Source: RHB Securities Research - 17 Jul 2020