Healthy pause after breakout; maintain long positions. The FKLI fell 8.5 pts to close at 1,624 pts. During intraday, the index tested the previous resistance-turned-support level of 1,621.5 pts. This can be seen as a result of profit taking activities, after the prior session’s sharp gain, and did not flash out a price exhaustion signal. The positive price reaction at the abovementioned immediate support level also points to a limited weakness in the index. In a bigger picture, the index’s breakout from July’s “Double Top” formation last Thursday remains valid and this underpins our expectation for the index to extend its multiple-month uptrend. Maintain our positive trading bias.

We recommend that traders remain in long positions. We initiated these at 1,611.5 pts, the closing level of 26 Nov. To manage risks, a stop-loss can be set below 1,615 pts.

The immediate support is maintained at 1,621.5 pts, which is the high of the previous “Double Top” formation in July. This is followed by 1,600 pts. Conversely, the immediate resistance is expected at 1,650 pts, followed by 1,665 pts.

Source: RHB Securities Research - 7 Dec 2020