FBM KLCI futures to face mild upward pressure

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) futures January contract on Bursa Malaysia Derivatives closed at 1,297 with an open interest of 17,447 contracts last week.

The spot contract, as expected, attempted to scale the 1,300 level after breaking the resistance band at 1,280. It was a straightforward effort which gave a hundred per cent results.

After finally breaking out of the 1,250-1,280 mould, the futures contract is poised to gather momentum although sentiment could turn a little more unpredictable.

The cracking of the resistance line at 1,300 was gradual enough not to raise any eyebrows to the fact that the spot contract has finally set a new high.



The 1,280 level is indicatively the new base for the spot contract, judging from the momentum indicators.

The challenge at the psychological 1,300 level is a testimony of how a resistance level can sometimes be overcome after prolonged consolidation.

After last week, the daily signals are still more bullish than their weekly counterparts - one of highlights in last's week article. This raises concern moving into this week as the shorter-term buying interest may be limited by the weekly outlook.

With the daily Relative Strength Index rising further from the overbought, we may see a continuation of the shorter-term momentum this week passing the 1,300 line.

Technically, it is not just the weekly Moving Average Convergence Divergence indicator which is currently easing. The Bollinger Band signals the risk of a decline should it breach the upper line.

On this note, although its shorter outlook still favours a technical upward adjustment, it may not warrant an aggressive recovery as its longer-term trend is still neutral.

Tactically, the spot contract is likely to experience mild upward pressure in the immediate term. This pressure, however, is likely to dissipate ahead of its resistance at 1,310.

Technical outlook

The daily Moving Average Convergence Divergence indicator turned positive with the faster above the signal line. Both lines remain at the positive region.

The weekly Relative Strength Index closed at the overbought.

The weekly Commodity Channel Index finished at the neutral.