OBSERVATIONS: The Kuala Lumpur CPO futures market plummeted for
the third consecutive week in a row last week.
The benchmark June
2010 contract closed last Friday at a 7-week low of RM2,534, down RM43
or 1.67 per cent over the week.
The price slide in the past three
weeks, from the recent peak of RM2,722 looks like quite a big fall.
Some players think it’s time for a correction, a technical rebound.
However, with no signs that this market is anywhere near its nadir in
the present bear phase the road ahead still leads south, though it might
be a winding one.
Several factors are weighing this market down.
The
recent strength in the US dollar, for one, was a depressant for all
world commodities which uses the greenback as a medium of exchange for
trade.
Weakness of crude oil, due to big supply buildup pressures
and the black goo’s inability to scale pass and stay above the US$80
(US$1 = RM3.31) a barrel level was another.
But what really pushed
this markets against the ropes last week was the latest and one should
add, disappointing export estimates.
Export monitors Societe
Generale de Surveillance (SGS) and Intertek Agri Services’ (IAS) March
1-25 export estimates for the commodity amounted to an average of 1.12
million tonnes, or some 24,000 tonnes above that exported in the
corresponding period in February.
That’s a huge comedown,
compared to the earlier March 1-15 average export estimate of about
654,000 tonnes which was 67,500 tonnes or 11.75 per cent above that for
first half February.
The industry expects a pickup in production
in March, which does not bode well for hopes for much of a decline in
end-March 2010 stocks, if any.
Conclusion: The RM2,500 a
tonne psychological level is the next logical target.
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.
Source : Business Times
