CPO trading to remain volatile


Forecasting Price Trends: A weekly column by G.M. Teoh on Crude Palm Oil, Soyoil, Cocoa and Cash Tin

CPO

The Malaysia Derivatives Exchange (MDEX) crude palm oil (CPO) futures prices started the week on a bearish note, falling sharply on weakness in the Chicago Board of Trade soyoil futures prices and managed to recover a large portion of their earlier losses in late trading. Prices settled the week with moderate declines. 

Cargo surveyor Societe Generale de Surveillance’s data on Malaysia's palm oil exports for the first 20 days of November showing they were sharply lower at 655,937 tonnes compared to 820,681 in October had limited bearish impact. Traders were more concerned about declining stocks that are expected to dip to the 800,000-tonne level at the end of November. 

The January 2004 CPO futures prices trended from a week's high of RM1,850 to RM1,688 and rebounded sharply to end the week at RM1,785, off RM49 per tonne from a week ago. 

Based on chart the January futures contract closed the week neutral-to-slightly positive and is expected to enter into sideways congestion trading this week. 

The January futures prices are faced with an immediate technical hurdle at the RM1,800–RM1,825 levels. Failure to successfully push above this resistance could set off fresh long-liquidation pressure and send the market on a downward wave. 

Chart support for this week is seen at the RM1,760–RM1,740 levels. Violation of this minor chart support could turn the immediate chart outlook negative. 

The daily indicator ended the week bearish and signalled the market could stay choppy with a downward bias this week. 

The daily stochastics triggered the sell signal on Nov 18 and closed on a negative note. The oscillators per cent K and D settled the week sharply lower at 49.60% and 56.10% respectively. Analysis of the daily stochastics shows the market has further downside potential. 

The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) remained positive at Friday’s close and signalled the upward cycle is not over. The 3- and 7-day ESA-lines closed about unchanged at 1,776 and 1,770 points respectively. 

The daily moving-average convergence/divergence (MACD) (not shown in the chart) turned bearish on Nov 18 and indicated the main trend is still negative. The daily MACD ended below the trigger-line and closed lower at 39.29 and 40.385 points respectively. 

The daily Momentum Index (MI) remained above the 100-point mark and closed the week lower at 102.23. Analysis of the daily MI shows the market’s immediate momentum has turned bearish. 

The Chicago Board of Trade soyoil futures prices soared to fresh contract highs in early trading last week boosted by strong advances in Malaysia's palm oil prices and then reversed direction towards mid-week and trended in the negative territory for most of the sessions before rebounding sharply on Thursday to close with small changes. 

Soyoil

Bearish sentiment during the week was attributed to uncertainty over further purchases of US soybean by China following cancellation of a soy-buying delegation visit to Chicago. Traders expect retaliation from China after the US announced new import quotas on Chinese textiles. 

Thursday’s strong technical rebound was linked to hopes that the US Senate would approve the bio-diesel tax incentive as part of the energy bill last week. Bio-diesel is developed from soyoil or other vegetable oils and can be used in diesel engines. 

The January-oil ranged from a week's high of 27.45 to 26.08 US cents and ended Thursday unchanged at 26.89 US cents per lb from previously. 

Based on chart the January soyoil futures prices closed the week neutral-to-slightly positive and may continue in choppy trading this week. 

Chart support for the January contract is seen at the 26.60–26.40 US cents levels. Failure to hold above these levels would indicate the positive momentum which developed late last week has fizzled. Chart resistance for this week is pegged at 27.00–27.25 US cents levels. Trading would turn bullish with more short-covering activities if these life-of-contract highs are successfully penetrated. 

The daily technical indicators closed the week mixed and signalled more random type of trading for the immediate term. 

The daily stochastics triggered the sell signal on Nov 18 and indicated the immediate cycle of the market is bearish. The daily oscillator per cent K ended below the oscillator per cent D and settled sharply lower at 51.68% and 71.26% respectively. 

The daily moving-average convergence/divergence (MACD) remained constructive at Thursday’s close and continued to indicate the main trend is still bullish. The MACD finished above the trigger-line and ended in the positive territory at 0.40 and 0.38 of a point respectively. 

The 3- and 7-day exponentially smoothed moving-average prices lines (ESA-lines) remained in positive divergence and signalled the market is in an upward cycle. The 3- and 7-day ESA-lines ended higher at 26.72 and 26.52 respectively. 

The daily Momentum Index (MI) remained above the 100-point mark and closed higher at 104.18. Analysis of the daily MI indicates the market’s upward momentum is intact. 

Cocoa futures prices on the Coffee, Sugar & Cocoa Exchange in New York fluctuated in directionless trading on lack of fresh fundamental news and closed Thursday with minor losses. Bullish excitement over the situation in Ivory Coast fizzled after last week’s talks of an attempt to dispose of the rebel leader. 

Cocoa

Light long-liquidation dampened the market all week on account of this development. 

The March 2004 futures prices ranged narrowly from a week's low of US$1,522 to US$1,585 and closed Thursday lower at US$1,540 per tonne, off US$51 a tonne from previously. 

Based on chart the March 2004 cocoa futures ended the week neutral and could stay in band trading this week. The daily bar chart shows an immediate chart support at the US$1,500–US$1,520 levels. Breaching of this lower trading band support this week could trigger fresh selling interests and pressure the March contract lower for a test of its next chart support at the US$1,450 level. 

Chart resistance for this week stands at US$1,560–US$1,590 levels. 

The daily technical indicators closed the week mixed and called for a slightly higher trading level this week. 

The daily stochastics triggered the trend change sell signal on Nov 17 and remained bearish at Thursday’s close. The daily oscillator per cent K ended below the oscillator per cent D and ended sharply lower at 44.72 and 59.11% respectively. 

The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) ended the week with a strong negative convergence and signalled a bearish cycle is about to start. The 3- and 7-day ESA-lines settled higher at 1,540 and 1,535 respectively. 

The daily moving-average convergence/divergence (MACD) remained bullish at Thursday’s close and signalled the market was not out of its positive cycle. The daily MACD and trigger-line closed the week higher in the positive territory at 18.77 and minus 17.19 points respectively. 

Tin

The daily Momentum Index (MI) ended above the 100-point mark and closed lower at 106.79. The daily MI signalled the market’s immediate momentum is slightly negative. 

Tin prices on the Kuala Lumpur Tin Market advanced on active buying ahead of the long Hari Raya holidays and closed Friday with moderate gains. 

Cash tin prices ended the week higher at US$5,330 per tonne, up US$29 per tonne from a week ago. Trades for the week fluctuated from US$5,339 to US$5,295 per tonne. 

Volume for the week rose sharply to 419 from 278 tonnes a week ago. 

Based on chart cash tin prices ended the week bullish and are set to continue with their upward momentum this week. Chart support is adjusted higher to the US$5,290–US$5,300 per tonne level. The immediate-term market could stay bullish if these levels are not violated. 

Chart resistance for this week is seen higher at US$5,350–US$5,380 levels. 

The weekly indicators remained positive at Friday’s close and called for more upward trading this week. 

The weekly stochastics stayed negative at Friday’s close and signalled the market is still in a bearish phase. The weekly oscillators per cent K and D closed the week lower at 66.29% and 71.94% respectively. 

The weekly moving-average convergence/divergence (MACD) retained its bullish signal at Friday’s close and indicated further upside potential for the immediate-term market. The MACD and the trigger-line closed the week slightly higher in positive territory at 0.165 and 0.160 of a point respectively. 

The 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines) ended the week bullish and confirmed the immediate cycle is bullish. The 3- and 7-week ESA-lines settled higher at 5,300 and 5,238 respectively. 

The weekly Momentum Index remained above the 100-point mark and ended lower at 102.50. Analysis of the weekly MI shows the immediate momentum of the market is slightly negative. 

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