Initiate long positions. The FKLI closed the latest session on a strong positive tone, adding 41 pts to close at 1,607 pts, crossing above the previous resistance marks of 1,585 pts and 1,602 pts. Consequently, a “Bullish Engulfing” formation appeared, indicating that the recent sessions’ retracement has probably reached an end. These positive observations have invalidated our previous expectation for the index to develop a correction phase. Hence, we change our trading bias to positive.

Our previous short positions, initated at 1,566 pts – the closing level of 16 Jul – were closed out at 1,602 pts in the latest session. Concurrently, we initiate long positions at the latest closing level. To manage risks, a stop-loss can be placed below 1,585 pts.

The immediate support is set at 1,595 pts – derived from the latest candle. This is followed by 1,564 pts, which is the low of 16 Jul. Moving up, the immediate resistance is eyed at 1,615 pts, followed by 1,621.5 pts – the high of 14 Jul.

Source: RHB Securities Research - 20 Jul 2020