Initiate long positions as the 2-month correction is likely completed. The FKLI sustained its opening’s “Upside Gap” to trend higher for the whole session, before closing 22.5 pts higher at 1,587.5 pts – near the session’s high of 1,589 pts. In a previous report, we highlighted the likely signs of market participants positioning for a possible end to the index’s 2-month correction phase. The latest strong performance has, in our view, validated this thesis. As such and at the minimum, a strong counter-trend is likely to develop in the near term. Premised on this, we switch our trading bias to positive. Note that while the index is still hovering under the 2-month downtrend line, our intention is to capture this possible rebound at the earliest possible time, on confirmed reversal signals.

Our previous short positions – initiated at 1,579 pts, the closing level of 18 Feb – were closed out at the breakeven point in the latest session. Concurrently, we initiate long positions. To manage risks, a stop-loss can be placed below 1,570 pts

Support levels are revised to 1,580 pts and 1,570 pts. Meanwhile, resistance points are marked at 1,592 pts, followed by 1,605 pts.

Source: RHB Securities Research - 26 Feb 2021