Maintain short positions. The FCPO rebounded higher, filling the void left by the Breakaway Gap. On Wednesday morning, the commodity gapped MYR12.00 lower to open at MYR3,630. In the first half of the session, it dipped to the day’s low of MYR3,606. The commodity found footing at the day’s low and climbed to the day’s high of MYR3,682. The FCPO closed at MYR3,678. Based on the latest price action, the Breakaway Gap has been filled and selling pressure has eased. The commodity may consolidate near this level before it challenges the resistance of the Bearish Engulfing pattern marked at MYR3,819. While the soft commodity is heading towards the MYR3,700-3,819 region, we may see a resurgence of selling pressure. Failure to clear the resistance may see the resumption of a downward movement. As such, we are maintaining a negative trading bias, until the stop-loss is breached.

We recommend that traders shift to short positions, which were initiated at MYR3,642 or the closing level of 2 March. To manage risks, a stop-loss can be placed above 1 Mar’s high of MYR3,819.

The nearest support level remains at 23 Feb’s low of MYR3,576, followed by the psychological level of MYR3,500. Towards the upside, the immediate resistance is now pegged at the round figure of MYR3,700, followed by the higher hurdle of MYR3,819.

Source: RHB Securities Research - 4 Mar 2021