Maintain short positions. The FKLI cut short its losing streak yesterday, rising 4 pts to settle at 1,596 pts. Following a sell-off on Wednesday, the index opened higher at 1,596.5 pts. Early in the session, selling pressure was too strong and dragged the index to test the day’s low of 1,573 pts. After the midday, buying pressure emerged and the index rebounded from the support level, paring down losses to close flat at 1,596 pts – forming a hammer reversal pattern near the 50-day SMA line. The bears proved strong in the last five sessions, but if the index can breach above the resistance – thereby charting a higher high – the correction phase may be completed. Otherwise, a breach of the support level will see more downside risks. Unless the trailing-stop is triggered, we will maintain a negative trading bias.

We recommend that traders remain in short positons. We initiated these at 1,665.5 pts, the closing level of 14 Dec. To manage risks and protect profits, a trailing-stop can be set above 1,618 pts.

The immediate support is marked at 19 Nov’s low – 1,583 pts, followed by 30 Nov’s low 1,573 pts. Towards the upside, the resistance is pegged at 27 Nov’s high of 1,618 pts, followed by 3 Dec’s high of 1,635 pts.

Source: RHB Securities Research - 8 Jan 2021