CPO likely in for congestion trade


CPO

Malaysia Derivatives Exchange (MDEX) crude palm oil (CPO) futures prices plunged on heavy long-hedge unwinding and speculative selling last week. The May futures dropped to their lowest levels since early November 2002 during Friday’s trading and recovered marginally to close the week with sharp losses. 

Traders are not exactly sure what prompted the lifting of the large buy-hedge by trade related players. Some traders speculated the unchanged Indian edible import duties might have triggered the sell-off as that duty structure could slow down that country's imports in the coming months. Worries that exports would continue to stay sluggish and stocks could climb higher in the coming two months encouraged many stubborn bulls to exit the market. 

Crop forecaster PALMIS Management's estimates for February helped inject some negative sentiment during late trading. PALMIS' estimates for February palm oil exports was sharply lower at 690,000 tonnes, down from 854,077 in January, and reported a slight increase in end-February stocks at 1.11 million tonnes from 1.10 tonnes at the end of January. 

The benchmark third-month May 2003 futures fell from an intra-week high of RM1,593 to RM1,503 and settled the week off their intra-week lows at RM1,528, off RM66 per tonne from previously. 

Based on chart, the sharp sell-off last week had resulted in the May 2003 futures contract forming a bearish trend. Violation of the crucial sell-off congestion support at the RM1,520–RM1,500 levels this week could signal the continuation of the bearish momentum and take the May futures sharply lower in search of a fresh trading base around RM1,470–RM1,460. 

Minor chart support for this week is seen at the RM1,450–RM1,430 levels. Chart resistance is pegged at RM1,535–RM1,540. 

Technical traders could take advantage of any technical rebound to sell with a tight-stop at the RM1,550–RM1,560 levels. 

The daily technical indicators closed the week mixed and called for more sideways-to-lower fluctuation this week. 

The daily stochastics slipped into the bearish extended-move zones last week and trigger the buy-signal at Friday’s close. The oscillators per cent K and D settled the week sharply lower at 13.58% and 8.63% respectively. 

Currently, this daily oscillator is indicating the market is technically oversold. Unless both the oscillators move back above the 20% line this week, the bearish extended-move is expected to continue. 

The 3- and 7-day exponentially smoothed moving-average price lines (ESA-line) remained bearish at Friday’s close and confirmed the bearish trend is intact. The 3- and 7-day ESA-lines closed the week sharply lower at 1,534 and 1,555 points respectively. 

The daily moving-average convergence/divergence (MACD) (not shown in the chart) closed with its sell signal intact and indicated the downward pressure is not over. The daily MACD closed the week below the trigger-line and ended at minus 18.33 and minus 13.36 points respectively. 

The daily Momentum Index (MI) remained below the 100-point mark and finished the week lower at 94.73. Analysis of daily MI shows the market’s negative cycle could continue. 

Soyoil

Soyoil futures at the Chicago Board of Trade reversed direction last week after heavy commodity fund selling triggered sell-stops that forced the market to return all of its previous week’s gains and finally settled Thursday sharply lower. 

Talks that China, the largest US soybean buyer, may be cancelling or switching orders from America to less expensive South American supplies pressured the market throughout week. Both Brazil and Argentina are experiencing good harvest conditions and are expected to flood the world market with cheaper beans in the second quarter. 

The May 2003 soyoil futures prices declined from a week's high of 20.78 to 20.26 US cents and ended lower at 20.54, down 0.38 US cent per lb from previously. 

Based on chart, the May 2003 soyoil futures prices ended the week negative and indicated the newly developed downward wave could continue this week. Chart resistance for this week is lowered to the 20.60–20.70 US cents levels. 

Chart support for this week stands at 20.30–20.40 US cents. Breaking of this important support would signal the continuation of the bearish move and pressure the May futures lower for a test of the minor chart support at the 20.10–20.00 US cents levels. 

The daily technical indicators closed the week bearish and pointed to more downside fluctuation this week. 

The daily stochastics flashed the sell signal on March 3 and remained bearish at Thursday’s close. The daily oscillator per cent K closed below the oscillator per cent D and settled the week sharply lower at 21.40% and 29.27% respectively. Analysis of this daily oscillator indicates the potential for further declines is strong. 

The daily moving-average convergence/divergence (MACD) triggered the sell signal on March 5 and ended the week on a negative note. The daily MACD finished below the trigger-line and closed slightly lower at minus 0.028 and minus 0.024 of a point respectively. The daily MACD has given indication a downward cycle has started. 

The 3- and 7-day exponentially smoothed moving-average price lines ended Thursday negative and indicated the recently developed downward wave could continue. The 3- and 7-day ESA-lines settled the week lower at 20.50 and 20.56 respectively. 

The daily Momentum Index (MI) dropped below the 100-point mark last week and closed in the negative territory at 99.51. Analysis of the daily MI indicates immediate momentum of the market is bearish. 

Cocoa

Cocoa futures prices on the Coffee, Sugar & Cocoa Exchange in New York fell sharply in early trading and rebounded mildly to close the week with moderate losses. Support from light speculative and commercial buying failed to contain the selling pressure from large fund long-liquidation. 

The May cocoa was pressured to its lowest levels in three months on Monday. 

The May 2003 cocoa prices declined from a week's high of US$2,054 per tonne to US$1,992 and closed the week sharply lower at US$1,992, down US$44 per tonne from a week ago. Trading remained choppy as traders awaited a new government in Ivory Coast. 

Based on chart, the May 2003 cocoa futures prices ended the week neutral and are set for wider sideways band trading this week. Chart support for this week stands at the US$1,980–US$1,950 levels. Breaking of this chart support would signal the continuation of the bearish momentum and pressure the May futures sharply lower for a test its minor support at US$1,900–US$1,850. 

Chart resistance for this week stands at the US$2,050–US$2,020 levels. 

The daily technical indicators ended the week mixed and suggested more choppy band trading this week. 

The daily stochastics flashed the buy signal on March 5 and indicated the market could make some upward adjustments this week. The daily oscillator per cent K closed above the oscillator per cent D and settled sharply higher at 46.87% and 35.25% respectively. 

The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) ended the week with their sell signal intact and signalled the immediate direction of the market is bearish. The 3- and 7-day ESA-lines settled sharply lower at 2,013 and 1,994 respectively. 

The daily moving-average convergence/divergence (MACD) remains bearish for the immediate-term market. The daily MACD and trigger-line settled lower in the negative zones at minus 58.94 and 49.94 points respectively. Analysis of the MACD shows the market could come under fresh selling pressure this week. 

The daily Momentum Index (MI) ended below the 100-point mark and settled lower at 84.74. Analysis of the daily MI confirms the market’s immediate momentum is still bearish. 

Tin

Tin prices on the Kuala Lumpur Tin Market failed to maintain their upward momentum last week as traders sold the market lower in moderately active trading. 

Ideas that recent excessive gains had resulted in the market becoming overbought encouraged sellers to lock in profits. 

Cash tin prices finished the week lower at US$4,665 per tonne, down US$100 from a week ago. Trades for the week fluctuated from US$4,705 to US$4,640 per tonne. 

Volume for the week dipped to 205 from 292 tonnes a week ago. 

Based on chart, cash tin prices' sharp technical pullback last week had resulted in the market trending below its uptrend support line. This is a technically bearish phenomenon and could result in the market trending lower this week. 

Chart support for this week is adjusted lower to the US$4,600–US$4,550 per tonne level. Violation of this support would signal the start of a bearish trend. Chart resistance stands at US$4,700–US$4,740. 

The weekly technical indicators closed mostly positive and signalled the main trend is still positive. 

The weekly stochastics retained their buy signal of a week ago and closed with a strong negative convergence and indicated a main cycle change is about to happen. The weekly oscillators per cent K and D closed lower at 74.90% and 75.37% respectively. 

The weekly moving-average convergence/divergence (MACD) retained its positive signal and continued to indicate the market’s main trend is bullish. The MACD and the trigger-line settled the week higher in the positive territory at 0.13 and 0.11 of a point respectively. 

The 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines) ended positive but have yet to give the cycle change signal. The 3- and 7-week ESA-lines finished lower at 4,674 and 4,594 respectively. 

The weekly Momentum Index (MI) remained above the 100-point mark but closed slightly lower at 110.93. Analysis of the weekly MI indicates the immediate momentum of the market is bearish. 

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