Maintain short positons. Towards the end of the latest session, the FKLI managed to narrow its losses to 1.5 pts to settle at 1,494 pts – the low was recorded at 1,486 pts. This means there is no clear breakdown from the crucial 200- day SMA line. However, the outlook for the index remains weak as the price pattern developed over the past five weeks following the retracement between mid-July and mid-September resembles the characteristics of a countertrend rebound within a downtrend. A decisively breakdown of the abovementioned SMA line would confirm this thesis and open the door for a deeper retracement. Maintain our negative trading bias.

We recommend that traders stick to short positons. We initiated these at 1,510 pts, the closing level of 12 Oct. To manage risks, a stop-loss can now be placed above 1,530 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. Moving up, the immediate resistance is set at 1,500 pts, followed by 1,515 pts.

Source: RHB Securities Research - 23 Oct 2020