Stop loss triggered; Initiate long positions. The FKLI breached the physcological support of 1,600 pts, declining 6.5 pts to settle at 1,598 pts. The index initially saw a glipmse of optimism, gapping up 4.50 pts to open at 1,609 pts that saw the bulls trading at the day’s high near 1,616 pts. However, the bullish sentiment evaporated, as the index declined towards the day’s low of 1,593 pts to close at 1,598 pts. The price action shows a “lower highs and lower lows” formation, indicating that the bearish sentiment is overshadowing the index. By breaching the stop loss level, the bulls’ strength has weakened, and the index is reverting to a correction phase. Coupled with the RSI trending below 50, we foresee the negative momentum accelerating the downward movement in the coming sessions. Since there is more downside risks, we shift over to a negative trading bias.

Our previous long positions initiated at 1,630.5 pts, or the closing level of 8 Jan, were closed out during the latest session after triggering a stop loss level of 1,603.50 pts. Conversely, we initiate short positions at the closing level of 21 Jan. To manage downside risks, a stop-loss can be set above the immediate support level of 1,623 pts.

The immediate support is revised to 6 Jan’s low of 1,586 pts, followed by 7 Jan’s low of 1,572 pts. Towards the upside, the resistance is pegged at 20 Jan’s high of 1,621 pts, followed by 18 Jan’s high of 1628.50 pts.

Source: RHB Securities Research - 22 Jan 2021