FBM KLCI futures likely to trade with upside bias

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index futures October contract on Bursa Malaysia Derivatives closed higher at 1,263 with an open interest of 15,426 contracts last week.

The spot contract continued its winning streak with the spot contract reaching its peak at 1,263, breaking the resistance at 1,250. Both the cash and the futures markets pushed ahead as overall sentiment improved.

Moving into this week, traders are likely to stay positive, looking for more directions from the cash market. This is, after all, budget week. Better volatility and liquidity seen in recent days have allowed intraday traders to increase participation in the market. The overall trend has remained firm. With that in mind, the rising trend is expected to remain intact despite some shorter-term selling pressure which may emerge this week.

Technically, based on the charts, the momentum improvement has started and continued to push the oscillators higher. The longer term Relative Strength Index has strengthened to overbought territory. Based on this indicator, the market momentum has improved considerably.

As the ADX is now at the trending pace with an improvement to 39, any overbought positions may not come under correction pressure.

Other weekly signals are still pushing higher, the Moving Average Convergence Divergence indicator and the Bollinger Band continue to stay within the upper band of the momentum range as the spot contract reached record levels. Support might be expected at the 1,250 should the weekly chart intersect the upper of the Bollinger Band.

Tactically, based on the signals, the October contact may continue to trade with an upside bias. Traders should expect the spot contract to be traded with increased volatility, especially with the resistance target being moved to the 1,280 level this week.

Technical outlook

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

The daily Relative Strength Index closed at the overbought.

The daily Commodity Channel Index finished at the overbought.