The Star

Monday August 25, 2008

Technical and speculative buying lifted prices sharply higher last week

by G.M. Teoh

CRUDE PALM OIL

CRUDE palm oil (CPO) futures on Bursa Malaysia Derivatives ended a volatile week with technical and speculative buying lifting prices sharply higher to a two-week high in response to the upward rally in crude oil and soyoil oil markets.

Bearish news that India had deferred shipment of 100,000 tonnes of crude palm oil from August to September had limited bearish impact on trading.

The move by Indonesia, the world’s largest CPO producer, to cut palm oil export taxes from 15% in August to 10% in September also received lukewarm reception from the bears last week.

The sharp rebound in crude oil and soyoil futures prices on the Chicago Board of Trade prompted many earlier bears to unwind positions.

Improved palm oil exports for the first 20 days of August aided the positive sentiment last week.

The November futures prices rebounded strongly from an intra-week low of RM2,351 and hit a two-week high of RM2,753 before settling the week sharply higher at RM2,715, up RM322 per tonne a week earlier.

Volume for the week fell to 65,980 from 76,879 contracts the week before. Open-interests at Thursday’s close slipped marginally to 52,745 from 53,273 contracts.

The daily candlestick chart closed the week positive and suggested the upward correctional trend would continue. A rising-window was formed on Friday and this type of candle usually implies a continuation of the positive trend.

Last week’s technical rebound has enabled the market to regain all previous week’s excessive losses. With the market having rebounded significantly from its decline lows, some range-bound trading can be expected in the coming sessions. If the market fails to exhibit strong bullish momentum and lacks the ability to advance, there is a possibility it would make a mild downward adjustment this week.

On Friday, crude oil and soyoil prices declined sharply and this bearish development would have some negative effect on trading.

Chart support for the November futures is expected at the RM2,650–RM2,600 levels. Long-liquidation pressure would likely emerge if these levels are violated.

Resistance for this week is seen at RM2,725–RM2,750. An upward break from here would signal the resumption of the upward rally.

The three daily technical indicators ended Friday on a positive note and signalled the upward technical rebound which occurred last week may be completed.

The daily stochastic gave the buy call on Aug 19 and managed to remain constructive at Friday’s close. The oscillators per cent K and D closed sharply higher in the positive zones at 88.13% and 67.40% respectively. The stochastic is suggesting the upward rally would expand.

The main trend-tracker, the 3- and 7-day ESA-lines, triggered the buy signal on Aug 21 and indicated a trend reversal. Friday’s closing in positive divergence shows the market still has upside potential.

The 5-day RSI changed direction last week and settled sharply higher in the positive territory at 64.17 points. Analysis of the daily RSI shows the market’s immediate underlying strength is positive.

This entry was posted on Monday, August 25th, 2008 at 12:37 pm 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.