Business Times

OBSERVATIONS: Dragged down by the meltdown on global commodities markets and stunned by news that that some Indian traders were reneging on deals for the import of Malaysian palm oil, the Kuala Lumpur CPO futures market crashed to levels not seen since October 2007.

The actively-traded October 2008 contract plunged to an intra-week low of RM2,700 before settling last Friday at RM2,779 a tonne, down RM171 or 5.80 per cent over the week.

News that some of India’s traders were backing down on palm oil-import deals agreed to earlier and had stopped issuing letters of credit came amid reports that that country had a good harvest of non-genetically modified soybeans this season, estimated at 9.47 million tonnes. India expects next year’s production of soyabeans to be at least 20 per cent higher as favourable rains were recorded over the main soyabean-growing areas of Maharashtra and Madhya Pradesh. India is Asia’s largest export of soyabean meal, used as animal feed.

The good Indian soyabean harvest and attendant higher production of soyabean oil also prompted speculation that India may impose import duty on palm oil, which further depressed fragile investor sentiment on the local market.

Crude oil’s tumble to below US$115 (US$1 = RM3.30) a barrel also was a depressant factor.

Light, sweet crude for September delivery on the New York Mercantile Exchange fell to a five-month low of US$114.62 a barrel in intra-week trade last week, its lowest level since falling from the record high of US$147.27 posted on July 11.

Conclusion: The Malaysian Palm Oil Board’s report on July exports, production and end-July 2008 stock figures should be out today and would have an immediate impact on market direction.

The short term trend, however, remains bearish.

HOW TO USE THE CHARTS AND INDICATORS

# THE BAR AND VOLUME CHART: This is the daily high, low and settlement prices of the most actively traded basis month of the crude palm oil futures contract. Basically, rising prices accompanied by rising volumes would indicate a bull market.

# THE MOMENTUM INDEX: This line plots the short/medium-term direction of the market and may be interpreted as follows:

(a) The market is in an upward direction when the line closes above the neutral straight line and is in a downward direction when the reverse is the case.

(b) A loss in the momentum of the line (divergence) when prices are still heading up or down normally indicates that the market could expect a technical correction or a reversal in the near future.

# THE RELATIVE STRENGTH INDEX: This indicator is most useful when plotted in conjunction with a daily bar chart and may be interpreted as follows:

(a) Overbought and oversold positions are indicated when the index goes above or below the upper and lower dotted lines.

(b) Support and resistance often show up clearly before becoming apparent on the bar chart.

(c) Divergence between the index and price action on the chart is a very strong indication that a market turning point is imminent.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.

 

This entry was posted on Monday, August 11th, 2008 at 10:16 am and is filed under Crude Palm Oil Futures. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.