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Monday, June 7, 2010

FBM KLCI futures in for pullback

FKLI >>> The Week Ahead
THE FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) futures June contract on Bursa Malaysia Derivatives closed at 1,299 with an open interest of 16,165 contracts last week.

The spot month continued its climb to the resistance at 1,302.50 last week, instigated by the stronger than expected performance on the equity market. As the market was decisively firmer there were buying opportunities leading to an increase in trading volatility.

Above 1,300, however, the spot month became susceptible to corrective pressure. This resulted in a pullback as the contract declined to end the week lower at 1,299. As the decline from the overbought has already been initiated the pressure may continue into this week.

Despite the downward pressure last week, the spot month remained within the trading band as the contract will likely to find resistance at 1,300 valid. For the longer-term chart, the 1,250 mark is likely to stay as a gauge of its lower boundary. With the price ending near the upper resistance, it can only suggest that the spot month is likely to experience more rangebound trading with downside bias this week.

The short-term view now favours sideways trading with minor downside bias given the toppish market momentum. So long as support stays intact at its pivotal line at 1,250 this week, any attempt to instigate the bulls to be aggressive may need more effort.

Tactically, we may see some pullback this week. Entry strategies at lower levels should instil some supportive elements but we may see the June contract easing to1,275 within the intra-day period but this may not lead to a concrete decline. Longer-term support stays at 1,250.
Technical reports

The Moving Average Convergence Divergence indicator remains negative with the faster above the signal line. Both lines at the negative region.
The daily Relative Strength Index closed at the neutral.
The daily Commodity Channel Index finished at the neural.
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