CPO momentum remains bearish


  • Business
  • Monday, 06 Sep 2004

By G.M. Teoh

CRUDE PALM OIL 

The Bursa Malaysia Derivatives crude palm oil (CPO) futures prices ended the week lower after a late round of selling forced the market to give back all its earlier gains. 

Huge gains in the Chicago Board of Trade soyoil prices in the early part of the week and favourable palm oil exports for August initially prompted heavy short-covering and speculative buying. The move, however, fizzled out as the technical strength died down and was followed by aggressive selling towards late week. 

Cargo surveyor Societe Generale de Surveillance (SGS) estimated Malaysia's palm oil exports for August 7% higher at 1,192,682 tonnes against 1,114,671 tonnes in the equivalent period in July. 

The November 2004 CPO futures prices ranged from a week's low of RM1,485 to RM1,566 and finished moderately lower at RM1,491, down RM36 a tonne from a week ago. 

The daily candlestick chart ended the week bearish and indicated the downward cycle would continue. Three black candles emerged over the past three trading days. Although these candles were not large enough to create three black crows, the consistent downward pattern is bearish for the immediate-term trend. 

The November 2004 futures prices have an immediate chart support at the RM1,480–RM1,470 levels. Breaking of these support levels in the coming sessions would signal the downward cycle is continuing. Chart resistance for this week stands at RM1,510–RM1,525. 

The daily technical indicators ended the week mostly bearish and signalled the market was not oversold and had the potential for further downward actions. 

The daily stochastic triggered the sell signal on Aug 30 and showed the downward pressure would be expanded. The oscillator per cent K settled below the oscillator per cent D and ended the week sharply lower at 33.75% and 54.32% respectively. 

The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) ended the week with a strong negative convergence and indicated a downward wave had started. The 3- and 7-day ESA-lines ended the week lower at 1,503 and 1,502 points respectively. 

The daily moving-average convergence/divergence (MACD) (not shown in the chart) is neutral to slightly negative for the near-term trend. The daily MACD ended above the trigger-line and closed higher in the positive territory at 14.82 and 14.20 points respectively. 

The 9-day RSI fell from a week's high of 73.71 points on Sept 1 and closed near the neutral territory at 53.79. Analysis of this daily RSI indicates the market is slightly negative and could move lower this week. 

SOYOIL 

The Chicago Board of Trade soyoil futures prices rallied on strong short-covering prompted by threats of an early freeze across the US Midwest and closed near their highest levels in five weeks. 

The lagging maturity rate in the US Midwest soybeans, owing to the unusually cool temperatures in August, gave rise to worries that an early frost could bring down the overall soybean yield. 

The US Department of Agriculture export data which on Thursday showed that US soybean sales a week ago had declined to 191,700 – way below the earlier trade estimates of 250,000 to 400,000 tonnes – capped the market's advances. 

The October soyoil futures prices surged from a week's low of 23.95 to 26.30 US cents and finished sharply higher at 26.20, up 2.16 US cents a week ago. 

The daily candlestick chart settled the week bullish and signalled the main trend was still positive. There were four white candles last week and the bullish pattern shows the upward positive momentum is not over. 

The daily chart indicated an immediate chart support for the October 2004 futures at the 26.00–25.75 US cents levels. The immediate chart outlook could turn slightly negative if these levels are breached this week. 

Chart resistance for this week is revised higher to 26.30–26.50 US cents. 

The daily technical indicators closed the week bullish and called for the resumption of the upward trend this week. 

The daily stochastic triggered the buy signal on Aug 31 and managed to remain positive at Thursday’s close. The daily oscillator per cent K ended above the oscillator per cent D and closed the week higher in the bullish extended-move zones at 91.58% and 74.92% respectively. 

The daily moving-average convergence/divergence (MACD) moved into a positive divergence last week and signalled more upside trading for this week. The MACD closed the week above the trigger-line and settled higher in the positive territory at 0.39 and 0.19 of a point respectively. 

The 3- and 7-day exponentially smoothed moving-average prices lines (ESA-lines) remained in positive divergence and indicated the upward cycle was not over. The 3- and 7-day ESA-lines settled the week positive at 25.88 and 25.28 respectively. 

The 9-day Relative Strength Index (RSI) rebounded from an intra-week low of 61.77 points and closed higher in the overbought zones at 73.29. At Thursday’s close, the daily RSI indicated the underlying strength of the market was bullish. 

COCOA 

Cocoa futures prices on the Coffee, Sugar & Cocoa Exchange in New York plunged in a broad sell-off pressured by producer-selling and large funds' long-liquidation and finally settled Thursday with huge losses. 

People simply could not find any strong reasons to stay long in the market at the start of the West Africa main crop harvest which could end up being a bumper despite earlier negative production delays owing to the prolonged dry spell in August. 

The December 2004 cocoa futures prices dropped from a week's high of US$1,695 to US$1,578 and settled sharply lower at US$1,588, down US$131 a tonne from previously. 

The candlestick chart ended the week bearish and called for further downward pressure this week. Three black candles emerged in the past three days of last week. The downward negative pattern shows the bearish momentum could persist this week. 

Chart support for this week is revised sharply lower to the US$1,570–US$1,550 levels. Violation of these levels would signal the continuation of the downward trend. Chart resistance stands at US$1,590–US$1,620. 

All the daily technical indicators closed the week bearish and confirmed the immediate trend would stay southwards. 

The daily stochastic triggered the sell signal on Aug 31 and stayed bearish at Friday’s close. The daily oscillator per cent K finished below the oscillator per cent D and settled sharply lower at 16.43% and 44.41% respectively. Analysis of the daily stochastic indicates the bearish cycle would continue. 

The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) closed the week bearish and indicated a bearish cycle had started. The 3- and 7-day ESA-lines settled the week lower at 1,617 and 1,646 respectively. 

The daily moving-average convergence/divergence (MACD) triggered the sell signal on Aug 31 and remained bearish for the near-term trend. The daily MACD and trigger-line ended the week lower at 18.15 and 26.84 points respectively. 

The 9-day Relative Strength Index (RSI) fell from a week's high of 62.12 points on Aug 30 and ended lower at 38.91. The RSI indicates the immediate underlying strength of the market is still negative. 

CASH TIN 

Tin prices on the Kuala Lumpur Tin Market made a mild technical rebound last week, supported by light buying interest, and closed the week moderately higher. 

Cash tin prices recovered US$92 per tonne and closed the week higher at US$9,980. Trades for the week fluctuated narrowly from US$9,070 to US$8,900. 

Volume for the week dropped to 281 from 433 tonnes previously. 

The daily candlestick chart settled the week slightly positive and continued to indicate the overhead resistance was strong. 

Chart support for this week is adjusted slightly higher to the US$8,950–US$8,900 a tonne level. For this week, the chart resistance is pegged at US$9,050–US$9,075. 

The weekly indicators closed slightly positive and indicated the possibility of further band trading this week. 

The weekly stochastic closed with its buy signal positive and signalled the immediate-term trend would remain steady. The weekly oscillators per cent K and D closed the week higher at 77.78% and 38.03% respectively. 

The weekly moving-average convergence/divergence (MACD) ended bearish for the near-term trend. The MACD and trigger-line settled the week lower in positive territory at 0.33 and 0.39 of a point respectively. 

The 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines) triggered the buy signal last week and indicated the main trend was slightly positive. The 3- and 7-week ESA-lines ended higher at 8,994 and 8,942 points respectively. 

The weekly Relative Strength Index (RSI) recovered from a week's low of 51.49 points and closed higher at 54.87. Analysis of the RSI shows the immediate underlying strength of the market is positive. 

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