The FKLI underwent strong selling pressure for the third consecutive session on Monday, and dived 15.50 points to close at 1,542 points, RHB Research said.
It gapped down to open at 1,552.50 points and fell to the day’s low of 1,538 points before the close. Trading momentum was weak, as the day’s high of 1,556.50 points is lower than the previous session’s closing level of 1,557.50 points.
Since the bulls are still at their weakest, we expect the correction to continue until there is a formation of a bullish reversal candlestick. In the event the index attempts to stage a rebound, strong resistance should emerge at the 1,556.50-point level.
Meanwhile, the 200-day SMA line is acting as the resistance now and sentiment should remain negative as long the index is trading below the long-term moving average line.
As the bears are still in control by charting “lower highs and lower lows”, we make no change to our negative trading bias. We advise traders to stick to short positions, which were initiated at 1,576.50 pts or the close of 5 May.
To minimise the trading risks, the stop-loss has been revised to 1,578 from 1,605 points. The immediate support is now at 1,527 points (8 Feb’s low), followed by 1,518 points or the low of 8 March. Meanwhile, the first resistance has been revised to 1,556.50 points (9 May’s high), then 1,578 points (6 May’s high) or the support-turned-resistance.
