Maintain short positions. The FKLI staged a strong positive intraday price reversal. At one point, it came close to testing the 50-day SMA line with a low of 1,547 pts, before rebounding to settle 8 pts higher at 1,577.5 pts. Consequently, a “Hammer” formation appeared. The relatively positive price reaction can be seen as a signal that the bulls are attempting to regain control over the index. However, pending further positive price actions in the coming sessions, we are keeping our negative trading bias.

We continue to recommend that traders remain in short positions. We initiated these at 1,569.5 pts, the closing level of 3 Aug. To manage risks, a stop-loss can be placed above 1,615 pts.

The immediate support is maintained at 1,564 pts, the low of 16 Jul. This is followed by 1,547 pts, which is the latest low printed. Conversely, the immediate resistance is at 1,580 pts, followed by 1,600 pts.

Source: RHB Securities Research - 5 Aug 2020