Maintain short positions. The FKLI reversed from its intraday low of 1,486 pts to hand in a gain of 3.5 pts to close at 1,497.5 pts. At one point, it reached a high of 1,499.5 pts in its attempt to test the resistance zone of 1,500-1,515 pts. The resistance zone was the index prior sessions’ sideways trading range. With the index remaining below this zone, we believe the index’s downside risk remains high and chances are high for it to, at the minimum, retest the low of the 11 Sep’s “Bullish Engulfing”. Should the said formation fail to hold, this would open the door for a deeper correction to set in as it also signals a valid downside breach from the 50-day SMA line, which has started to curve lower. Maintain our negative trading bias.

Until prospects of a stronger rebound are confirmed, we advise traders to remain in short positions. We initiated these at 1,491 pts, the closing level of 21 Sep. To manage risks, a stop-loss can be set above 1,515 pts.

The immediate support is maintained at 1,483.5 pts, the low of 24 Sep. This is followed by 1,476 pts, the low of 29 Jun. On the upside, resistance levels are marked at 1,500 pts, followed by 1,515 pts.

Source: RHB Securities Research - 5 Oct 2020