Trailing-stop triggered; initiate short positions. The FCPO shifted to a downtrend after retracing by MYR62.00 last Friday. It closed with a long black candle, at MYR3,927. This formation of a Bearish Engulfing pattern indicates that bearish trend may have begun. It opened higher with a gap-up at MYR4,047, then dipped in the early session before reversing direction to touch the high of MYR4,084. However, the direction changed to negative in the late afternoon, and the commodity swiftly fell to its low of MYR3,921. It closed below the trailing-stop of MYR3,943. As suggested in the previous note, traders should lock the profits below the trailing-stop, to avoid the impact of a further downward movement. Although the FCPO is still trading above the 50-day SMA line – with the RSI above 50% – indicating a positive momentum in the medium term, the commodity may have commenced on a corrective phase to see prices retrace lower for the immediate term. As such, we switch our trading bias from positive to negative.

We close out the long positions initiated at MYR3,590 on 15 Apr, after triggering the trailing-stop at MYR3,943. Conversely, we initiate short positions at the close of 23 Apr, ie MYR3,927. To manage risks, we set the initial stop-loss above the MYR4,084 resistance level.

The immediate support is revised to MYR3,843, while the next support stays at MYR3,800. Towards the upside, the immediate resistance is revised to the MYR4,084 – the stop-loss level – while the next resistance stays at MYR4,192 – 15 Mar’s high.

Source: RHB Securities Research - 26 Apr 2021