Top pick for the day - FBMKLCI-HG

What to do when the market is down?


Malaysia's FBMKLCI Index (KLCI) made a biggest one day drop as prices slid 31pts yesterday. Prices slipped below the bearish flag support and this breakdown has negative implication in the near term.

As we mentioned in our previous report (see Crossroad Section in 5th Aug issue), a drop below 1,695 would potentially bring about a sharp fall in KLCI.

If prices do not rebound today, the KLCI would likely be closing below the 1,700 psychological mark (on a weekly basis) for the first time since May 2013. Therefore, yesterday's close could be the beginning of the next leg down.

Don't panic yet.

These days, there are many instruments that can be traded even if the market is falling in a volatile environment.

Put warrants are one of them, which is a derivative product that is traded on the equity market. It will move up when the underlying asset is going down as the owner of the right has an option to sell the asset at an agreed price on or before a particular date.

Nevertheless, these products are only for investors with a high risk appetite.

We believe that FBMKLCI-HG (0650HG) (right chart) is probably one of many put warrants, which we think are worth taking a look. Do bear in mind that the expiry date is on the 30th Nov 2015.

Yesterday, prices moved up and closed strongly above its ST triangle pattern. This breakout is likely to lead to a more bullish near term outlook.

Look for a push above the RM0.23 high and test RM0.275, the channel resistance. Put a buy stop below RM0.16. (Read Report)

Source : CIMB Research

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