The Star

Monday - November 05, 2007

by G. M. Teoh

CRUDE PALM OIL

Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives soared to uncharted territory in extremely choppy conditions influenced by the strength of crude oil and soyoil prices and finished the week with huge gains.

New York’s Nymex light sweet crude hit a record high of US$96.20 a barrel on Thursday and triggered a surge in CPO prices. Record soyoil prices added fuel to the already bullish setting and helped spark buy-stops orders.

Traders are putting aside CPO fundamentals and just concentrating on crude oil and soyoil for market direction. Things can continue to be very volatile with wide price swings this week.

Societe Generale de Surveillance’s revealed that Malaysia’s palm oil exports for October fell 7.9% to 1.303 million from 1.415 million tonnes in September, which encouraged some liquidation selling during mid-week.

The January futures prices fluctuated from a week’s low of RM2,814 to RM2,959 and ended sharply higher at RM2,917, up RM117 a tonne from a week earlier. The spot-November contract futures established a fresh historic high at RM2,994 on Monday.

Volume for the week increased to 69,586 contracts, equivalent to 1.74 million tonnes, compared with 65,528 contracts or 1.64 million tonnes the week before. Open interests at Thursday’s close fell to 42,760 from 47,076 contracts previously.

The high weekly volume, accompanied by a moderate drop in the daily open-interests, suggests people are jumping in and out of the market on a daily basis and raking in fast profits.

The daily candlestick chart remained slightly positive at Friday’s close. A “spinning-top” occurred on Friday. A “spinning-top” is a candle with a small real body and identifies a session where there is little price action as defined by the difference between the opening and the closing. At a rally high, a spinning-top can be a signal that prices are losing momentum.

The market would remain volatile this week with crude oil prices setting the pace. The January futures’ immediate chart support is seen at the RM2,875–RM2,850 levels. The near-term trend would continue to stay constructive if these levels are not violated. Chart resistance for the immediate term is adjusted higher for this week to the RM2,940–RM2,980 levels.

The technical indicators remained mixed at Friday’s close and called for further wide-range trading this week.

The daily stochastic triggered the sell signal on Oct 31 and ended the week in a negative setting. The oscillators per cent K and D finished higher at 81.25% and 82.22% respectively.

The 3- and 7-day ESA-lines closed in bullish divergence and suggested the short-term trend was still positive. The 5-day RSI closed marginally lower at 72.61 points and indicated the market was in an overbought condition.

This entry was posted on Monday, November 5th, 2007 at 12:23 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.