THE FTSE Bursa Malaysia Kuala Lumpur Composite Index futures (FBM KLCI) January contract on Bursa Malaysia Derivatives closed at 1,295.50 with an open interest of 19,083 contracts last week.
By the close of trading last week, many wondered whether the appearance of the "doji" pattern on the daily chart is a sign of things to come this week. Those who have been looking for an opportunity to go "long" in the market are certainly viewing this transitory candlestick pattern as a healthy development. The pullback from the high of 1,307 had been very well supported above the 1,300 level up until last Friday.
Technically, the pullback trend on the daily chart did not raise any alarm as to an increased risk of a major correction. Instead, the decline has once again pushed the momentum to the oversold, inciting some pressure for a technical rebound. The transgression into the oversold territories on the Commodity Channel Index is not surprising.
The weekly chart, however, suggests that the spot contract could move into a more consolidative pattern this week ahead of support on the mid Bollinger Band. This could reduce the aggression of the sellers this week as those with structural positions in the market could take this as entry opportunity. This could dictate the trading strategy for the weeks to some as the rising weekly pattern is likely to plateau.
Tactically, our call of a mild sustained rise could take effect this week only if the futures spot contract continue to stay above the 1,280 level. The oscillators are still retreating but look out for build-up in volume to confirm any rebound potential.