Bearish phase after failed CPO rally


  • Business
  • Monday, 10 Feb 2003

MALAYSIA Derivatives Exchange (Mdex) crude palm oil futures prices attempted a brief rally after the Chinese New Year holidays, but the move was short-lived as long-liquidation pressure emerged as the market failed to react positively to the strong gains in the Chicago Board of Trade soyoil futures prices. Expectation of a lower export number for the first 10 days of February and the generally holiday type of trading environment encouraged many stale-bulls to unwind last week.  

The benchmark third-month April 2003 futures declined from an intra-week high of RM1,636 to RM1,590 and finished the week down RM42 from its intra-week’s high and off RM25 from a week ago to finally settle Friday at RM1,594 per tonne.  

Chart-wise, the April 2003 crude palm oil futures ended the week bearish and are set to continue with its downward momentum in the coming four-day trading week. Chart-support for this week is seen at the RM1,590-RM1,580 level. Violation of this vital immediate term chart-support would signal that the bearish cycle is intact and could generate fresh selling pressure and take the April contract lower for a test of its minor chart-support at the RM1,560-RM1,550 level. Chart resistance for this week is lowered to the RM1,605-RM1,615 level.  

The daily technical indicators finished the week bearish and signalled the prospects of further sideways-to-lower fluctuations this week.  

The daily stochastics remained bearish during Friday’s close and called for more downward actions this week. The oscillator per cent K and D closed the week sharply lower at 35.97% and 44.74% respectively.  

The 3-day and 7-days exponentially smoothed moving-average price-line (ESA-line) expanded on the sell-signal of Jan 29 and indicated that the bearish momentum could carryover into this week’s trading. The 3-day and 7-day ESA-lines closed the week lower at 1,604 and 1,612 points respectively.  

The daily moving-average convergence/divergence (MACD) maintained its sell-signal of a week ago and stayed bearish during Thursday’s close. The daily MACD closed the week below the trigger-line and settled the week lower at minus 5.19 points and minus 3.48 points respectively. Analysis of the MACD shows that the market’s downward trend could persist.  

The daily momentum index (MI) settled the week below 100-point mark and closed slightly lower at 98.88 points. Analysis of MI confirmed that the market’s immediate direction is negative.  

Soyoil futures at the Chicago Board of Trade (CBOT) surged strongly in early trading and reversed direction for most of the sessions on an aggressive technical setback influenced by talk that South America’s soybean output might exceed the latest record estimates. Improved soybean crop weather and reports of healthy crops in Argentina and Brazil encouraged commercial hedge selling. Soybean production in Brazil, Argentina and Paraguay is expected to be higher than the estimated 2002/03 US soybean crop of 74.29 million tonnes for the first time.  

The May 2003 soyoil futures prices fell from a weekly-high of 21.07 US cents to 20.25 US cents and rebounded to close Thursday slightly lower at 20.48 US cents, off 0.02 US cents per lb from a week ago.  

Chart-wise, the May 2003 soyoil futures prices finished the week bearish and are expected to continue with its downward wave this week. Chart resistance for this week remains unchanged from a week ago at the 20.50-20.60 US cents per lb level. Chart-support remains at the 20.10-19.90 US cents level. Breaching of these January-lows would signal that the downward trend is continuing.  

The daily technical indicators closed the week negative and suggested that the bearish wave could sustain this week.  

The daily stochastic triggered the sell-signal on Feb 5 and closed Thursday on a negative note. The daily oscillator per cent K settled below the oscillator per cent D and ended at 58.53% and 74.14% respectively. Analysis of the daily stochastic indicates that the market is in a negative cycle. 

The daily moving-average convergence/divergence (MACD) closed Thursday with its buy-signal intact and indicated that the market’s main trend is still positive. The daily MACD settled above the trigger-line and closed marginally higher at minus 0.14 and minus 0.17 points respectively.  

The 3-day and 7-day exponentially smoothed moving-average price lines triggered the sell-signal on February 6 and confirmed that a bearish cycle had started. The 3-day and 7-day ESA-lines closed the week moderately higher at 20.61 and 20.63 respectively.  

The daily momentum index (MI) eased from an intra-week’s high of 104.57 points and closed in the positive territory at 101.25 points. Based on the daily MI, the market’s immediate momentum is negative.  

Cocoa futures prices on the Coffee, Sugar & Cocoa Exchange (CSCE) in New York fell sharply on aggressive speculative and trade selling and closed Thursday on a seven-day low ahead of Ivory Coast President Gbagbo’s address scheduled for late Friday. After two solid weeks of advances on rumours, fears, concerns and renewed fighting in Ivory Coast, speculators took advantage of the March option expiration and Gbagbo’s speech as a reason to sell the market lower.  

The May 2003 cocoa prices dropped from a weekly-high of US$2,375 to US$2,263 and closed the week sharply lower at US$2,275, down US$79 per tonne from a week ago.  

Chart-wise, the May 2003 cocoa futures prices ended the week bearish and had given strong technical indications that the downward trend would continue into this week’s trading. Thursday’s close below the uptrend support-line at the US$2,330-level signalled that a trend change has taken place.  

Chart-support for this week is seen at the US$2,250- US$2,200 level. Breaking of this important support would signal the start of a bearish trend and force the market to return a good portion of its recent excessive gains. Minor chart-support for the near term is peg at the US$2,150- US$2,100 level.  

Chart resistance for this week is seen at the 2,290-2,320 levels.  

The daily technical indicators ended the week bearish and called for further downward trading this week.  

The daily stochastic turned bearish on February 4 and closed Thursday on a negative note. The daily oscillator per cent K closed below the oscillator per cent D and finished sharply lower at 56.25 and 76.57 % respectively. Analysis of the daily stochastic indicates that the immediate term market would stay under selling pressure.  

The 3-day and 7-day exponentially smoothed average price-line (ESA-line) closed the week with a strong bearish convergence and indicated that a trend change is about to start. The 3-day and 7-day ESA-lines settled the week higher at 2,311 and 2,308 respectively. A successful crossover this week would confirm that a bearish trend has started.  

The daily moving-average convergence/divergence (MACD) triggered the sell-signal on Feb 6 and confirmed that a bearish trend has begun. The daily MACD and trigger-line settled higher in the positive zones at 71.29 and 72.26 points respectively.  

The daily momentum index (MI) fell from a weekly high of 109.60 points and settled slightly lower at 105.60 points. Based on the daily MI, the market’s immediate momentum is bearish.  

Tin prices on the Kuala Lumpur Tin Market (KLTM) turned negative during the shortened three-day Chinese New Year trading week and closed Friday with moderate losses. Sluggish demand and the softer tin prices in the London Metal Exchange (LME) encouraged buyers to retreat to lower levels.  

The cash tin prices closed the week lower at US$4,410 per tonne, down US$92 per tonne from previously. Trades for the week fluctuated from US$4,490 to US$4,410 per tonne.  

Total volume for the week dropped to 90 tonnes from 192 tonnes a week ago. 

Chart-wise, the cash tin prices are expected to resume its downward trend this week. Chart-support for this week is revised lower to the US$4,350-US$4,380 per tonne level. Violation of this immediate chart-support would confirm the continuation of the bearish cycle and probably send the market lower. Chart-resistance for this week is seen at the US$4,430- US$4,450 level.  

The weekly technical indicators closed the week mixed and called for further declines this week.  

The weekly stochastics closed the week negative and indicated that a bearish trend had started. The weekly oscillator per cent K and D settled lower at 76.48% and 83.72%.  

The weekly moving-average convergence/divergence (MACD) failed to give the trend-change signal. The MACD and the trigger-line ended the week with small changes in the positive territory at 0.08 and 0.07 of a point respectively.  

The 3-week and 7-week exponentially smoothed average price-lines (ESA-lines) ended bearish and indicated that a bearish trend has begun. The 3-week and 7-week ESA-lines closed at 4,444 and 4,467 respectively.  

The weekly momentum index remained above the 100-point mark and closed lower at 105.78 points.  

Analysis of the weekly MI indicates that the market’s immediate momentum had turned bearish. 

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