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 players 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.]]>