Forecasting Price Trends: A weekly column by G.M. Teoh on Crude Palm Oil, Soyoil, Cocoa and Cash Tin
CRUDE palm oil futures prices at the Bursa Malaysia Derivatives expanded the downward cycle on light selling pressure that dominated trading throughout most of the sessions last week.
Indonesia’s decision not to increase its export prices for palm oil products exerted pressure on prices and prompted some long liquidation activities.
Higher Malaysian palm oil exports for the first 20 days of October failed to provide the market with a boost as it fell within earlier trade expectations. Societe Generale de Serveillance (SGS) estimated Oct 1-20 exports of palm oil products higher at 789,289 tonnes, up 0.9% from the same period in September.
The January futures prices dipped from a weekly high of RM1,459 to RM1,417 and ended the week moderately lower at RM1,418, off RM34 per tonne from a week ago.
Total volume for the week declined sharply to 24,133 contracts from 26,677 previously. Open interest as at Thursday’s close dropped to 26,060 contracts from 28,285 a week ago.
The daily candlestick chart ended the week bearish and signalled that the three-week downward cycle is not over.
Immediate chart support for the January futures prices adjusted lower to the RM1,425-RM1,420 level. A fresh bearish momentum would be generated if this level is successfully breached. Further downward pressure would take values lower to test its minor chart support at the RM1,410-RM1,400 level in the near term.
Chart resistance for this week is seen lower at the RM1,445-RM1,450 level.
The daily technical indicators closed the week mostly negative and called for the resumption of the bearish cycle this week.
The daily stochastic ended the week bearish and indicated that the negative cycle is continuing. The oscillators per cent K and D ended the week higher at 21.68% and 30.89% respectively.
The daily MACD expanded on the sell signal of Oct 7 and signalled the prospects of further downward pressure. The MACD and the trigger line settled the week lower in the positive territory at 7.84 and 9.69 points respectively. Based on the daily MACD reading, the immediate-term direction of the market would remain bearish.
The exponentially smoothed moving average price lines (ESA lines) held on to the sell signal of Oct 11 and closed the week bearish. The 3-day and 7-day ESA lines settled the week lower at 1,439 and 1,446 points respectively. Analysis of the ESA lines indicates that the bearish trend is intact.
The 9-day RSI dropped from a weekly high of 50.88 points on Oct 17 and ended sharply lower in negative territory at 32.25 points. Analysis of the daily RSI shows that the immediate underlying strength of the market is bearish.
SOYOIL futures prices on the Chicago Board of Trade (CBOT) closed the week slightly lower after having earlier underpinned by positive export numbers for soybeans, active commercial support and active soybeans purchases from China.
Active US soybeans harvesting and clear, warm weather exerted pressure on beans prices. USDA reported early last week that 76% of the US soybean crop taken off the fields. The figures were within the trade expectations and much higher than the five-year harvesting average of 67%.
The December soyoil futures prices trended narrowly from a weekly high of 24.71 US cents to 23.85 US cents and settled Thursday moderately lower at 23.98 US cents, off 0.05 US cents perpound from a week ago.
The daily candlestick chart ended the week on a neutral setting and suggested further sideways band trading with a slight negative bias this week.
Chart support for this week is pegged at the 24.00-24.15 US cents level. Violation of this immediate-term support would set the market on a bearish course. Chart resistance for this week is seen higher at the 24.50-24.65 US cents level.
The daily technical indicators closed the week mostly bullish and points to further upside trading this week.
The daily stochastic triggered held on to the buy signal of Oct 12 and ended slightly negative with a strong negative convergence and indicated that a downward cycle is about to begin.
The oscillators per cent K and D settled the week higher at 71.23% and 70.63% respectively.
The 3-day and 7-day exponentially smoothed moving average price lines (ESA lines) gave the buy signal on Oct 12 and stayed constructive on Thursday’s close. The 3-day and 7-day ESA lines settled higher at 24.26 and 24.13 points respectively.
The daily MACD ended the week positive and signalled that the upward cycle is intact. The MACD and trigger line ended the week higher in the positive zones at 0.30 and 0.29 point respectively.
The 9-day RSI dropped from a weekly high 62.30 points on Oct 18 and settled the week slightly higher at 58.80 points.
Analysis of the RSI shows that the immediate underlying strength of the market is mildly positive.
COCOA futures prices on the New York Board of Trade (NYBOT) started the week at a two-week high boosted by speculative and commercial buying encouraged by the weaker dollar and short positions unwinding from troubled brokerage house Refco.
Light downward pressure emerged for the rest of the week on Ivory Coast hedge selling pressure and a stronger dollar. Weakness for the week and sluggish trading conditions was blamed to producers getting ready to hedge the fresh West African crop. The Ivory Coast marketing begins from October to March next year.
The December cocoa futures prices eased from a weekly high of US$1,405 to US$1,364 per tonne and recovered slightly to close Thursday lower at US$1,367, off US$41 from previously.
The daily candlestick chart closed the week slightly positive and signalled that the gradual upward cycle that was formed last week would continue.
An immediate chart support for this week stands at the US$1,380-US$1,370 level. A downward wave would start if this level is successfully breached. Chart resistance for this week is revised higher to the US$1,420-US$1,430 level.
The daily oscillators ended the week mixed and called for more sideways trading this week.
The daily stochastic triggered the short-term sell signal on Oct 18 and indicated that the market would move into band trading with a slight downward bias. The daily oscillators per cent K and D settled the week higher at 50.00% and 55.38% respectively.
The 3-day and 7-day exponentially smoothed moving average price lines (ESA lines) continued to show that the upward cycle is intact. The 3-day and 7-day ESA lines ended higher at 1,387 and 1,381 points respectively.
The daily moving average convergence/divergence (MACD) failed to indicate a short-term trend reversal. The MACD and trigger line finished the week lower at -8.47 and -10.01 points respectively and remained positive for the short-term trend.
The 9-day Relative Strength Index (RSI) rebounded from a weekly low of 45.96 points on Oct 17 and ended the week slightly higher in the positive zone at 52.96 points. Analysis of the daily RSI shows that the immediate underlying strength of the market is positive.
TIN prices on the Kuala Lumpur Tin Market (KLTM) came under renewed selling pressure influenced by the decline in the London Metal Exchange (LME) tin prices and closed the week at the worst level in 23 months.
Tin prices at the KLTM dropped from a weekly low of US$6,540 to US$6,360 and ended Friday sharply lower at US$6,415, off US$85 per tonne from a week ago.
Total volume for the week increased to 490 tonnes from 171 tonnes a week ago.
The candlestick chart closed the week bearish and indicated that it would remain under pressure in the near term.
Chart support for this week is seen lower to the US$6,300-US$6,280 level. Chart resistance for this week is adjusted lower to the US$6,400-US$6,420 level.
The weekly oscillators closed the week mostly bearish and points to more downward pressure in the near term.
The weekly stochastic ended deep in the bearish extended move zones and signalled more downward trading. The oscillators per cent K and D settled lower at 6.51% and 17.61% respectively.
The weekly moving average convergence/divergence (MACD ended the week bearish for the near-term trend. The MACD and trigger line closed the week at -0.35 and -0.34 points respectively.
The 3-week and 7-week exponentially smoothed moving average price lines (ESA lines) remained in bearish divergence on Friday and confirmed that the near-term trend is bearish. The 3-week and 7-week ESA lines settled the week lower at 6,130 and 6,462 points respectively.
The 9-week Relative Strength Index (RSI) ended lower in the oversold territory at 18.39 points. Analysis of the weekly RSI indicates that the market is in a technically oversold state.