Choppy trading seen for CPO


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 futures prices rallied on fresh speculative buying and short-covering strength to close the week at its highest levels in two months. The soyoil futures prices in the Chicago Board of Trade (CBOT) surged strongly after the US State Department of Agriculture (USDA) lowered its forecast for 2003/2004 soyoil production and ending stocks last week.  

The December 2003 crude palm oil futures prices rallied from a weekly-low of RM1,330 to RM1,416 and closed the week with strong gains at RM1,415, up RM88 per tonne from a week ago.  

Chart-wise, the December futures ended the week bullish and signalled that the market could stay choppy this week.  

The December futures are faced with an immediate chart-resistance at the RM1,430-RM1,445 level. Penetration of this minor-resistance could clear the way for a test of its next chart-resistance at the RM1,465-RM1,475 level. Chart-support for this week is adjusted higher to the RM1,400-RM1,390 level. Breaching of this support would signal the start of a downward correction and indicate that the upward momentum had fizzled out. 

The daily technical indicators closed the week mixed and suggested that the recent upward surge had created a technically overbought situation.  

CPO

The daily stochastics triggered the sell-signal on Sept 18 and signalled that the market is overdone at current levels. The oscillator per cent K and D ended the week negative at 90.83% and 92.50% respectively. Based on this daily oscillator, there is a strong change that the market would correct downwards this week. 

The 3-day and 7-day exponentially smoothed moving-average price-line (ESA-line) expanded on the buy-signal of Sept 11 and ended the week with a strong positive divergence. The 3-day and 7-day ESA-lines closed the week bullish at 1,389 and 1,363 points respectively. As at Friday’s close, the ESA-lines continue to signal that the upward cycle is intact.  

The daily moving-average convergence/divergence (MACD) (not shown in the chart) held on to its buy-signal of Sept 11 and indicated that the main trend is still bullish. The daily MACD closed above the trigger-line and settled higher at 16.17 points and minus 12.08 points respectively.  

The daily momentum index (MI) closed above the 100-point mark and ended the week higher at 107.76 points. Analysis of the daily MI shows that the market’s immediate momentum is bullish.  

Soyoil

The Chicago Board of Trade (CBOT) soyoil futures prices ended Thursday sharply higher, boosted by aggressive speculative buying and funds short-covering and closed at its best levels in four months. Talks that China had bought a substantial amount of US soybean and USDA’s larger-than-expected cut in its 2003 US soybean production and reduction in the 2003/2004 soybean end-stocks estimates encouraged bullish activities last week. 

The December-oil jumped from a weekly low of 22.12 US cents to 23.40 US cents and settled sharply higher at 23.22 US cents per lb, up 0.91 US cent per lb. from previously.  

Chart-wise, the December soyoil futures prices ended the week on a constructive note and looks set for further advances this week. 

Chart-support for this week is seen at the 23.00-22.90 US cent levels. The positive momentum is expected to continue if these levels are not successfully violated. The December-oil may trend higher to test its next upside-target at the 23.40-23.50 US cent levels this week. 

The daily technical indicators ended the week mixed and signaled that the recent advances had caused the market to be slightly overbought.  

The daily stochastics triggered the sell-signal on Sept 17 and signalled that a mild downward correction could take place this week. The daily oscillator per cent K ended below the oscillator per cent D and closed the week higher at 91.30% and 93.45% respectively.  

The daily moving-average convergence/divergence (MACD) remains positive for the near-term trend during Thursday’s close. The daily MACD ended above the trigger-line and closed higher in the positive territory at 0.64 and 0.56 points respectively. 

The 3-day and 7-day exponentially smoothed prices lines (ESA) remained in positive divergence and indicated that the upward cycle is intact. The 3-day and 7-day ESA-lines finished the week higher at 22.84 and 22.30 respectively.  

The daily momentum index (MI) advanced and ended above the 100-point mark at 111.79 points. Analysis of the daily MI shows that the immediate momentum of the market is bullish.  

Cocoa

Cocoa futures prices on the Coffee, Sugar & Cocoa Exchange (CSCE) in New York trended sideways the entire week and closed with small losses. The narrow trading band resulted from activities of funds that sold and was supported by limited arbitrage buying by commercial houses. Most other players stayed on the sideline awaiting fresh development as Ivory Coast celebrates its first anniversary of the coup.  

The benchmark December 2003 futures prices fell from a weekly high of US$1,525 to US$1,469 and closed Thursday lower at US$1,478, off US$21 a tonne from previously.  

Chart-wise, the December 2003 cocoa futures ended the week neutral and are set to continue in sideways band trading this week. A narrow trading band is seen for this week at the US$1,470-US$1,520 level. A break in either direction could set the trend for the market in the immediate term. Currently the technical indicators are favouring a break on the downside.  

The daily technical indicators closed the week mostly bearish and called for more negative trading this week.  

The daily stochastics triggered the buy-signal on Sept 16 and signalled that the market is out of its bearish extended-move phase. The daily oscillator per cent K ended above the oscillator per cent D and settled higher at 15.27% and 12.87% respectively. Analysis of the daily stochastics shows that the market could adjust higher this week. 

The 3-day and 7-day exponentially smoothed average price-line (ESA-line) stayed bearish and indicated that the market is in a bearish cycle. The 3-day and 7-day ESA-lines closed the week lower at 1,487 and 1,526 respectively.  

The daily moving-average convergence/divergence (MACD) remained bearish and indicated that the main trend could stay negative this week. The daily MACD and trigger-line closed the week lower at minus 15.06 and minus 7.89 points respectively.  

The daily momentum index (MI) remained below the 100-point mark and ended lower in the negative territory at 85.28 points. The daily MI continues to indicate that the market’s immediate trend is bearish.  

Tin

Tin prices on the Kuala Lumpur Tin Market (KLTM) lacked direction last week and stay in narrow band trading before closing the week with small losses. Lacklustre performances in the LME kept players on the sideline.  

The cash tin prices closed the week slightly lower at US$4,840 per tonne, down US$10 per tonne from previously. Trades for the week congested narrowly from US$4,850 to US$4,825 per tonne.  

Total volume for the week dropped marginally to 265 tonnes from 289 tonnes a week ago. 

Chart-wise, the cash tin prices closed the week neutral to slightly negative and are expected to trend eastwards trading this week. Chart-support for this week stays unchanged at the US$4,810- US$4,830 per tonne level, and violation of this chart-supports could cause the market to trend lower.  

Chart resistance for this week is lowered to the US$4,870-US$4,880 levels.  

The weekly technical indicators closed the week bearish and signalled that the market could adjust lower this week.  

The weekly stochastics expanded on its sell-signal and closed Friday negative. The weekly oscillator percent K and D finished the week lower at 75.53% and 77.95%.  

The weekly moving-average convergence/divergence (MACD) ended the week with its bearish signal intact and indicated that the main trend is bearish.  

The MACD and the trigger-line finished the week in positive territory at 0.077 and 0.0879 points respectively.  

The 3-week and 7-week exponentially smoothed average price-lines (ESA-lines) closed positive and signalled that the immediate trend could stay slightly bullish. The 3-week and 7-week ESA-lines closed the week lower at 4,840 and 4,820 respectively.  

The weekly momentum index ended below the 100-point mark at 99.46 points. Analysis of the weekly MI indicates that the market is in a bearish cycle. 

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