Maintain short positions. The FKLI was not able to sustain the price surge recorded in an earlier session. It reached a high of 1,691.5 pts in the first hour of trading, then declined for the rest of the day. It briefly entered into negative territory with a low of 1,674.5 pts, before settling at 1,677.5 pts – indicating a 1-pt gain. The sharp negative intraday price reversal reinforces our bias that the index is already trading in a correction phase, following its prior sharp 2- week gains after breaking out from July’s “Double Top” formation. This correction phase should stay put, as long as the index remains capped by the 1,700-pt resistance. In terms of time frame, we regard this as a multi-week correction phase, and make no change to our negative trading bias.

We recommend traders to stay in short positons. We initiated these at 1,665.5 pts – the closing level of 14 Dec. To manage risks, a stop-loss can be set above 1,700 pts.

We revise the immediate support to 1,672 pts, followed by 15 Dec’s low of 1,654 pts. On the upside, the immediate resistance is now pegged at 1,691.5 pts – the latest high, followed by 1,700 pts.

Source: RHB Securities Research - 17 Dec 2020