Maintain long positions. The FKLI saw a pullback towards the 50-day SMA line, erasing 4 pts to settle at 1,613.5 pts. The index opened 7.5 pts lower yesterday at 1,610 pts. Despite a weak opening, it rose towards the day high of 1,624 pts. However, sentiment turned jittery just before the lunch break, falling to the day low at 1,592.50 pts. Buying interest emerged again during the late afternoon, which saw the FKLI paring earlier losses to close at 1,613.50 pts. Throughout the session, we saw the bulls had not given up yet – there was buying pressure near the 50-day SMA line, while the RSI was trending below the 50% threshold. Since the momentum has become weaker, we think the index will likely consolidate sideways before it can test the upside resistance. As long as it is trading above the stop-loss level, we will maintain a positive trading bias.

We recommend traders stick to long positions. We initiated these at 1,630.5 pts, or the closing level of 8 Jan. To manage downside risks, a stop loss can be set below the immediate support, ie 1,603.5 pts.

The immediate support is marked at 7 Jan’s high of 1,603.5 pts and followed by 30 Nov’s low of 1,573 pts. Towards the upside, the resistance is pegged at 3 Dec’s high of 1,635 pts – this is followed by 29 Dec’s high of 1,655.5 pts.

Source: RHB Securities Research - 13 Jan 2021