FBM KLCI futures likely to hold above 1,150 level

Published: 2009/09/07

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) futures September contract on the Bursa Malaysia Derivatives Berhad closed higher at 1,182 last Friday with an open interest of 14,326 contracts.

The consolidation trend in the futures market remained largely intact for the third consecutive week after the it failed to crack the 1,200 psychological resistance line.

Last week's resistance forecast at 1,180 was broken, adding hope of a trend resumption. This juncture, since the futures did not experience any major correction below the 1,150 level, could be tell tale signs of things to come.

Looking back, what began as a mild adjustment as the futures move within the discount to the cash index, was switched to a 4-point premium last Friday.



Fundamentally the rise was significant enough to raise eyebrows but it has permitted the bulls to seep back into the market. This development could be a prelude to more bullish participation in the market this week.

Based on the daily technical indicators - it is quite evident that most of them are now trading at the overbought territory and further rise will only push it deeper in.

Since the trending momentum has already been initiated, it would not be surprising if the futures index continue to rise further as it could have consolidated enough. With the absence of any signals that it could fall back to the 1,150 level the spot may rise beyond the 1,180 this week.

The weekly chart continued to stay focused with the 1,150 and 1,200 level in sight, raising the prospect of a continuation in the rising trend. This is again a conservative expectation as the futures have tested this upper resistance line before.

Tactically this week we are expecting the September contract to hold above our new support line at 1,150. The pivotal resistance level this week can be located at 1,198. The only difference between this week's resistance line and its predecessor is that we are expecting this line to hold, given the proximity of the Bollinger lines on its daily chart.

Technical reports

The Moving Average Convergence Divergence remains negative with the faster below the signal line. Both lines remain at the positive region.

The Relative Strength Index closed at the overbought region.

The Commodity Channel Index finished at the overbought region.