CPO may be pressured lower
Forecasting Price Trends
COMMODITIES
By G.M. TEOH
Palm oil fundamentals taking a backseat to crude oil CRUDE PALM OIL
Crude palm oil futures on Bursa Malaysia Derivatives finished the week sharply
lower pressured by long-liquidation and speculative selling influenced by the
strong pullback in crude oil prices. The February futures prices initially
hit a new historic high at RM3,068 a tonne and then reversed direction and fell
to a low of RM3,027 in early trading on Thursday. The downward move was
short-lived and resulted in a strong technical bounced boosted by crude oil
prices that rebounded almost US$5 during the Asian trading hour in reaction to
the Canadian-US oil pipeline explosion. Prices finally sank on
Friday in line with crude oil prices that returned all the earlier gains.
For now, it is all about crude oil prices. Palm oil fundamentals are taking a
back seat currently and these two partners would continue to waltz to the same
music for some time. Anyone who can successfully predict
crude oil prices would have a field day trading CPO futures. The February
futures prices ranged from a week's low of RM2,923 to RM3,068 and ended sharply
lower at RM2,930, off RM114 a tonne from previously. Volume for the week
fell sharply to 51,855 from 71,959 contracts a week earlier. Open-interests at
Thursdays close declined slightly to 41,391 from 42,950 contracts previously.
The daily candlestick chart closed the week negative and called for the
resumption of the newly developed downward momentum. There were four black
candles in the past five days and the black candle on Friday suggests the
immediate strength of the market is weak. The newly developed downward
momentum is likely to expand this week. The February futures have an important
chart support at the RM2,920RM2,900 levels. Violation of these support levels
would likely trigger fresh selling momentum and take values lower to test the
next minor chart support at the RM2,8502,820 levels. Chart
resistance for this week is seen at RM2,935RM2,950. The technical
indicators ended the week in a bearish setting and suggested the market would
continue with its downward correction. The daily stochastic triggered the
sell signal on Nov 26 and ended the week in a negative setting. The oscillators
per cent K and D ended sharply lower in the oversold zones at 17.41% and 27.13%
respectively. The trend-tracker, the 3- and 7-day ESA-lines, turned negative
on Nov 28 and closed the week in negative divergence, indicating the
immediate-term trend is still negative. The 5-day RSI is now pointing south
after ending sharply lower in the negative territory at 39.77 points. The RSI
is signalling the immediate underlying strength of the market is weak.
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