Maintain short positions. The FKLI failed in its third attempt to breach the 1,577.5-pt immediate resistance. After reaching a high of 1,578 pts, it slid to settle 1.5 pts lower at 1,570.5 pts. While the index is still sitting above the 50-day SMA line, further positive price actions are needed to signal the end of the index’s correction phase. We see the upside breach of the said immediate resistance as the required price signal. Additionally, the RSI is still trending below the resistance line (as drawn in the chart), suggesting weak momentum. Hence, we are keeping our 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.

The immediate support is eyed at 1,565 pts, derived from 18 Aug’s candle. This is followed by 1,555 pts – the price point of 15 Aug. Conversely, the immediate resistance is set at 1,577.5 pts, the high of 13 Aug. This is followed by 1,585 pts, near 7 Aug’s high.

Source: RHB Securities Research - 25 Aug 2020