Forecasting Price Trends: A weekly column by G.M. Teoh on Crude Palm Oil, Soyoil, Cocoa and Cash-Tin
The Malaysia Derivatives Exchange (MDEX) crude palm oil (CPO) futures prices started the week higher and soared after the two-day trading break on aggressive short-covering and speculative buying boosted by cuts in base import price of soyoil and palm oil by India and bullish performances on the Chicago Board of Trade soybean oil futures.
Prices rose to a nine-week high in early trading on Friday but reversed direction on strong profit-taking selling and finally settled the week off RM43 from its intra-week high of RM1,493, but up RM44 from a week ago.
Exports for the first 15 days of May, as revealed by Societe Generale de Surveillance (SGS), at a higher 545,076 tonnes compared with 465,384 tonnes in the same period in April supported sentiment.
The July 2003 futures prices advanced from a week's low of RM1,417 to RM1,493 and settled sharply higher at RM1,450, up RM44 per tonne from a week ago.
Based on chart CPO futures ended the week slightly negative and the negative momentum established during late trading on Friday is expected to continue.
The failure of the July futures to successfully vault the early April highs at the RM1,495 level despite a higher-than-normal volume last week shows the market may have reached its rally highs. For the coming week an immediate overhead resistance stands at the RM1,480–RM1,470 levels.
For the market to remain bullish these levels would have to be penetrated and followed by a successful push above the double-top highs at the RM1,495 levels.
Chart support for this week is seen at the RM1,440–RM1,430 levels. Violation of this chart gap could result in further technical weakness and send prices lower for a test of the next chart gap at the RM1,410 level.
The daily technical indicators ended the week mixed and signalled the downward momentum which started late Friday would carry-over into this week’s trading.
The daily stochastics ended the week in the bullish extended-move zones and stayed negative at Friday’s close. The oscillators per cent K and D settled lower at 87.77% and 91.93% respectively. Currently, the daily stochastics are indicating the market is toppish and called for further downward adjustments.
The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) stayed positive at Friday’s close and signalled the trend is still positive. The 3- and 7-day ESA-lines settled the week higher at 1,439 and 1,417 points respectively.
The daily moving-average convergence/divergence (MACD) (not shown in the chart) ended the week with its positive signal intact. The daily MACD settled above the trigger-line and closed higher at minus 0.23 and minus 14.44 points respectively. Based on the daily MACD, the three-week-old upward cycle is not over.
The daily Momentum Index (MI) continues to indicate the market’s immediate momentum is positive and settled the week higher at 107.00 points.
Soyoil futures on the Chicago Board of Trade surged to fresh contract highs on fund buying, prompted by cuts in the base import price of crude soyoil oil by India and news that a group of hog and poultry producers has bought 40,000 tonnes of soymeal from Brazil for last-half July shipment.
Spread trading involving the purchase of soyoil and selling of soymeal lifted soyoil values last week.
The July 2003 soyoil futures prices advanced from a week's low of 22.84 to 23.71 US cents and settled Thursday sharply higher at 23.70 US cents, up 1.15 US cents per pound from previously. Based on chart the July soyoil futures prices closed the week slightly positive and could settle for some downward correction this week.
The July futures prices' immediate chart support at the 23.40–23.20 US cents levels is likely to be tested in the event of a technical pullback. Breaching of this chart support could pressure values lower for a test of the minor support at 23.00–22.80 US cents levels.
Chart resistance for this week stands at the 23.60–23.70 US cents levels. Trading above these levels would signal the bullish rally is continuing.
The daily technical indicators ended the week mostly positive and showed the market’s upward cycle is intact.
The daily stochastics retained the buy signal, ending deep in the bullish extended-move zones and indicated the market is slightly top-heavy. The daily oscillators per cent K closed above the oscillator per cent D and settled sharply higher at 95.70% and 92.84% respectively.
The daily moving-average convergence/divergence (MACD) turned bullish at Friday’s close and signalled the market’s immediate trend is positive. The daily MACD ended above the trigger-line and settled higher in the positive zones at 0.36 and 0.21 of a point respectively.
The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) expanded on their buy signal of May 7 and closed the week constructive. The 3- and 7-day ESA-lines settled higher at 23.33 and 22.87 respectively. Based on the ESA-lines the immediate cycle of the market is positive.
The daily Momentum Index (MI) remained above the 100-point mark and closed higher in the positive territory at 106.89. Analysis of the daily MI shows the market’s immediate momentum is still positive.
Cocoa futures prices on the Coffee, Sugar & Cocoa Exchange in New York resumed their downward trend last week as sellers dominated and pressured the market to its lowest levels in 5 1/2 month low. There was little market-moving news and trading was confined mostly to technical trading, with locals and speculators caught on the wrong side of the market.
The July 2003 cocoa prices dropped from a week's high of US$1,822 to US$1,730 and settled Thursday sharply lower at US$1,757, down US$60 a tonne from previously.
Based on chart the July 2003 cocoa futures prices ended the week neutral-to-slightly bearish and indicated the bearish three-week-old downtrend could continue. Chart support for this week is revised lower to the US$1,720–US$1,700 levels. Breaching of these important chart supports would confirm the bearish trend is continuing.
Chart resistance for this week is seen at the US$1,780–US$1,790 levels.
The daily technical indicators ended the week bearish and pointed to a resumption of the bearish trend.
The daily stochastics closed the week deep in the bearish extended-move zones and flashed the short-term buy signal on May 15. The daily oscillator per cent K closed above the oscillator per cent D and at 10.00% and 7.27% respectively.
The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) retained their sell signal last week and indicated the bearish cycle is not over. The 3- and 7-day ESA-lines closed the week lower at 1,754 and 1,785 respectively.
The daily moving-average convergence/divergence (MACD) remained negative and signalled the downward pressure could continue. The daily MACD and trigger-line finished lower in the negative zones at minus 50.49 and minus 32.12 points respectively.
The daily Momentum Index (MI) remained below the 100-point mark and ended Thursday lower at 87.33. Analysis of the daily MI indicates the bearish momentum would continue this week.
Tin prices on the Kuala Lumpur Tin Market advanced on light trading and surged towards late trading to closed the week with strong gains.
Cash tin prices ended the week sharply higher at US$4,770 per tonne, up US$55 per tonne from a week ago. Trades for the week ranged from US$4,770 to US$4,700 per tonne.
Volume for the week declined to 157 from 182 tonnes a week ago.
Based on chart cash tin prices ended the week on a positive note and appeared set to continue with the upward rally. Chart support for this week is adjusted higher to the US$4,750–US$4,710 per tonne level. Failure to trade below these levels would set the market on a bullish course and cause it to trend higher for a test of the mid-February highs at the US$4,800 level.
The weekly technical indicators closed mixed and indicated the prospects for a higher trading phase this week.
The weekly stochastics stayed bullish at Friday’s close and indicated the market has reached its technically overbought levels. The weekly oscillators per cent K and D closed higher at 91.87% and 75.00%.
The weekly moving-average convergence/divergence (MACD) flashed the buy signal at Friday’s close and signalled the main trend is positive. The MACD and the trigger-line closed the week higher in the positive territory at 0.10 and 0.09 of a point respectively.
The 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines) signalled the market’s immediate cycle is bullish. The 3- and 7-week ESA-lines ended higher at 4,715 and 4,655 respectively.
The weekly Momentum Index (MI) remained above the 100-point mark and ended the week lower at 101.27. Analysis of the weekly MI suggests the market is still in a constructive phase.