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 turned volatile and jumped widely, with prices initially falling sharply during mid-week in reaction to the huge decline in the Chicago Board of Trade soyoil futures prices.
Prices, however, rebounded strongly in the latter part of the week, spurred by bullish predictions made at the palm oil conference in Kuala Lumpur and views that palm prices would not fall much ahead of Malaysia's general election in two weeks’ time.
The benchmark third-month May 2004 CPO futures prices rebounded from the week's low of RM1,920 to RM2,003 and finished higher at RM1,986, up RM39 per tonne from previously.
Based on the daily candlesticks chart, the May 2004 futures prices finished the week positive.
During the past five days, there had been four white candles and one black candle for a net of three white candles. A white candle occurred because prices closed higher than their opening level. The three white candles occurred during the past three days, and although these candles were not large enough to qualify as “three white soldiers” (extremely bullish signal), the steady upward pattern is constructive.
The May 2004 futures prices' immediate chart support stands at the RM1,975–RM1,965 levels. Breaching of these support levels could send the May futures prices lower to below the RM1,950 level.
Chart resistance for this week is adjusted higher to RM1,995–RM2,010.
The daily indicators ended the week mixed and signalled the market could remain volatile this week.
The daily stochastic triggered the buy signal on March 2 and continued to call for a higher trading level this week. The oscillator per cent K closed above the oscillator per cent D and settled the week sharply higher at 77.63% and 72.21% respectively.
The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) remained positive for the immediate-term trend. The 3- and 7-day ESA-lines ended the week higher at 1,982 and 1,969 points respectively.
The daily moving-average convergence/divergence (MACD) (not shown in the chart) triggered the buy signal on March 3 and closed the week with a weak negative convergence.
The daily MACD ended above the trigger-line and settled slightly higher in the positive territory at 45.32 and 45.27 points respectively.
The daily Momentum Index (MI) recovered from a low of 100.51 points on March 2 and closed higher above the 100-point mark at 102.95. Analysis of the daily MI shows the immediate momentum of the market is still positive.
The MDEX crude palm kernel oil futures prices finished the week slightly higher. The April contract closed the week RM8 higher at RM2,298 per tonne. Trades for the week ranged from RM2,269 to RM2,298 per tonne. Volume for the week dipped to 60 from 91 contracts a week ago.
THE Chicago Board of Trade (CBOT) soyoil futures prices made new contract highs in early trading last week before abruptly turning south on aggressive selling. Prices finally ended Thursday with big losses.
Negative upward revision by the US Census Bureau in its end-January US soyoil stocks to 1.41 billion pounds and market talk of US soyoil import dampened sentiment.
The May-oil futures prices dropped from a week's high of 35.05 to 32.60 US cents per pound and ended sharply lower at 32.79 US cents, off 1.24 cents per pound from a week ago.
Based on the daily candlesticks chart, the May 2004 soyoil futures prices closed the week negative and may trend lower in a sideways pattern. Over the past four trading days, there were two white candles and two black bars.
Last Tuesday’s bearish “engulfing bear” black candle signalled there was a break in the main trend and the downward technical correction may continue this week.
An important chart support is seen for the May 2004 futures at the 32.60–32.30 US cents levels. Breaching of these support levels in the early part of this week could bring on fresh technical selling pressure and trigger strong stale-bull liquidation.
Chart resistance for this week is adjusted higher to the 32.85–33.05 US cents levels.
The daily technical indicators settled the week bearish and indicated the market could trend lower this week.
The daily stochastic triggered the sell signal on March 1 and signalled the downward cycle could continue this week.
The daily oscillator per cent K closed below the oscillator per cent D and settled the week sharply lower at 14.01% and 33.37% respectively.
The daily moving-average convergence/divergence (MACD) closed the week bearish and pointed to more downside trading this week. The MACD settled below the trigger-line and ended lower in the positive territory at 0.97 and 1.04 points respectively.
The 3- and 7-day exponentially smoothed moving-average prices lines (ESA-lines) flashed the trend reversal signal on March 2 and closed the week bearish. The 3- and 7-day ESA-lines settled the week slightly lower at 33.17 and 33.51 respectively.
The daily Momentum Index (MI) fell from a week's high of 106.30 points on March 1 and closed lower in the negative territory at 97.61. Analysis of the daily MI indicates the immediate momentum of the market is bearish.
COCOA futures prices on the Coffee, Sugar & Cocoa Exchange in New York ended the week sharply lower on stale-bull speculative and commodity funds selling. News of fresh outbreak of violence in top producer Ivory Coast was largely ignored by traders.
The May 2004 cocoa futures prices sank from the week's high of US$1,570 to US$1,463 and closed sharply lower at US$1,475, down US$85 a tonne from previously.
Based on chart the candlesticks chart closed the week bearish for the May 2004 cocoa futures prices and suggested more negative trading this week. Over the past four trading days, there were three black candles against one white candle. A black candle occurred because prices closed lower than the ir opening level.
The three black candles occurred in the past three days, and although these candles were not large enough to create “three black crows”, the downward momentum is likely to be sustained this week.
Chart support for this week is seen higher at the US$1,460–US$1,440 levels. Violation of these levels would signal a bearish breakout and pressure the market lower. Chart resistance is adjusted lower to US$1,520–US$1,650.
The daily technical indicators ended the week mostly bearish and signalled the recently developed bearish momentum could resume this week.
The daily stochastic triggered the sell signal on March 2 and remained bearish at Thursday’s close. The daily oscillator per cent K closed below the oscillator per cent D and settled sharply lower at 21.17% and 44.75% respectively. Analysis of the daily stochastic shows the bearish cycle could continue.
The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) triggered the sell signal and indicated a cycle change on March 3 and stayed bearish at Thursday’s close. The 3- and 7-day ESA-lines settled the week lower at 1,498 and 1,513 respectively.
The daily moving-average convergence/divergence (MACD) turned bearish on March 3 and signalled the main trend has turned bearish. The daily MACD and trigger-line ended the week lower in the negative territory at minus 14.92 and minus 13.08 points respectively.
The daily Momentum Index (MI) closed below the 100-point mark last week and ended lower in the negative territory at 95.53 on Thursday. The MI shows the market’s immediate momentum is bearish.
TIN prices on the Kuala Lumpur Tin Market advanced in early trading and managed to hold steady on moderate consumer interest and closed the week at the peak of the bull-run at US$7,000 per tonne.
Cash tin prices settled the week US$75 per tonne higher at US$7,000 after fluctuating narrowly from US$7,000 to US$6,995.
Volume for the week was higher at 380 from 368 tonnes previously.
The candlesticks chart settled the week slightly negative for the immediate term. A “doji star” occurred last week, and this often signals a trend reversal that requires confirmation in the following bar.
Chart support for this week is revised slightly higher to the US$6,960–US$6,940 per tonne level. The bullish trend would be deemed intact if these levels were not successfully violated. Resistance is seen at the US$7,050–US$7,780 levels.
The weekly indicators closed the week mostly bullish and called for the continuation of the upward trend this week.
The weekly stochastic remained in the bullish extended-move zones on Friday and indicated a strong negative convergence (showing a downward trend is about to start). The weekly oscillators per cent K and D closed the week lower at 92.04% and 87.09% respectively.
The weekly moving-average convergence/divergence (MACD) expanded its buy signal of a fortnight ago and ended the week on a positive note. The MACD and trigger-line closed the week slightly higher in positive territory at 0.45 and 0.44 of a point respectively. Based on the daily MACD the bullish trend is still in place.
The 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines) remained in bullish divergence last week and signalled the upward cycle was not over. The 3- and 7-week ESA-lines settled higher at 6,890 and 6,710 respectively.
The weekly Momentum Index (MI) closed above the 100-point mark, and ended higher at 108.52. Analysis of the weekly MI shows the bullish momentum is still intact.
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