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Monday, August 30, 2010

FBMKLCI Futures

Index futures' immediate resistance at 1,450 level
THE spot month contract on FTSE Bursa Malaysia Derivatives closed at 1,414 last Friday with open interest of 10,566 contracts. It finally broke the 1,400 level effortlessly. Volume was moderate throughout the whole episode. Having ended at the upper end of this range, traders may adopt the strategy of entry on pullback, especially when it nears the support level of 1,380.
Based loosely on the trading pattern of the past two weeks when the futures were traded around the 1,400 and loose support was at 1,380, it would not be surprising to find the prices finally breaking this mould as it enters its next trading phase, which is the mark-up period. After a series of normalised trading pattern the past two weeks, we are now expecting market volatility to pick up and heavier gyration take place. The closing at 1,414 could be the tip of the iceberg of heavier volatility ahead.
The breach into the overbought territories on the Relative Strength Index and the Commodity Channel Index are not expected to trigger concern of a major correction as momentum moves into a trending pace. Given this direction, traders should pay close attention to the possibility of a further strengthening in prices as a breakout has taken place.

What the bulls may find in their favour is the imminent positive crossover on the Moving Average Convergence Divergence signal. This should ground any concern of a bearish revival. Over the medium term, we may see fresh recovery in the market. The primary trend is still positive and we see the current development as the continuation to positive aspiration.
Tactically, the spot contract looks more bullish on the weekly chart as it continues to sail along the rising trendline. Notwithstanding the volatility on the daily chart, the smoothened weekly chart looks much more promising. With support intact at the 1,400 level, the immediate resistance can be located at the 1,450 level.

Technical Reports
The Moving Average Convergence Divergence turned positive with the faster above the signal line. Both lines remain in the negative region. The daily Relative Strength Index closed at the overbought, while the daily Commodity Channel Index finished at the overbought.

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