Maintain short positions. On Wednesday, the FKLI tested the resistance zone of 1,577.5-1,585 pts to chart a high of 1,583.5 pts, before giving back most of the gains to settle 2 pts higher, at 1,574.5 pts. The failure to cross above the 1,577.5 pts resistance means there is no positive price signal follow-through to indicate the index’s retracement leg has reached an end, after it recently tested the 50-day SMA line. Premised on this, we are maintaining a negative trading bias.

Traders should 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 now be set above 1,577.5 pts.

We are keeping the immediate support at 1,565 pts – derived from the 18 Augs’ candle. This is followed by 1,555 pts, the price point of 15 Aug. Moving up, the immediate resistance is maintained at 1,577.5 pts, the high of 13 Aug. This is followed by 1,585 pts, a point near 7 Aug’s high.

Source: RHB Securities Research - 21 Aug 2020