Maintain long positions. After hitting into a wall of resistance, the FKLI retraced 6 pts to settle at 1,631 pts last Friday. During the latest session, the index gapped 2 pts lower to open at 1,635 pts, and fell to the day’s low of 1,625.50 pts. Buying interest emerged near the day’s low, lifting the index towards the day’s high of 1,640.50 pts. However, selling pressure resurfaced as the index retraced towards the day’s low for the rest of the session, ending the day at 1,631 pts. We foresee the index consolidating between the sideway zone ie the resistance of 1,650 pts and support of 1,603.5 pts. Expect the daily average trading range to contract during consolidation or volatility tapering. A breakout of either threshold will see a new trend forming with volatility increasing. Since the index is trading above the 50-day SMA line, we maintain a positive trading bias

We recommend that traders maintain 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, followed by 6 Jan’s low of 1,586 pts. Towards the upside, the resistance is pegged at 1,650 pts, followed by 29 Dec’s high of 1,655.5 pts.

Source: RHB Securities Research - 18 Jan 2021