OBSERVATIONS: The Kuala Lumpur CPO futures market’s pendulum has
swung back up.
This it did in late trade last week when the
actively-traded April 2010 contract broke through on the upside the
erstwhile short term RM2,510 a tonne overhead resistance level. The
contract settled last Friday at RM2,521, up RM79 or 3.24 per cent over
the week.
But whether this market will continue swinging up
depends on developments this week, in particular the Malaysian Palm Oil
Board (MPOB) report, due to be unveiled this Wednesday and, of course,
what market and industry
make of it.
Speculation, in the wake of January’s robust export estimates, that the
commodity is likely to see a major improvement in its fundamentals was
the main reason this market’s strong price fillip last week.
Speculation, in the wake of January’s robust export estimates, that the
commodity is likely to see a major improvement in its fundamentals was
the main reason this market’s strong price fillip last week.
Export
monitors Societe Generale de Surveillance (SGS) and Intertek Agri
Services (IAS) put January 2010’s exports of palm oil at 1,478,739
tonnes and 1,496,805 tonnes respectively. Although that does not surpass
the record high for palm oil exports of 1,614,720 tonnes registered in
December 2008, the combined average of 1.488 million tonnes is still a
whopping 304,000 tonnes or 25.70 per cent higher than that shipped out
in December 2009.
However, the robust export estimates will need
official confirmation and all eyes this week on the Malaysian Palm Oil
Board’s (MPOB) report on January 2010 trade data and end-January 2010
palm oil stock position, due out this Wednesday.
Conclusion:
The MPOB report on January 2010 trade data and stocks will be critical
in determining whether this market can maintain its bullish momentum.
The
technical indicators as of last Friday, on balance, were more bullish
than 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.
