CPO prices decline sharply

CRUDE PALM OIL

BURSA Malaysia Derivatives crude palm oil (CPO) futures prices sank almost 4.5% on heavy long liquidation from speculators and the trade early last week.

CPO

Prices then rebounded marginally on a technical bounce towards late week on light short covering strength influenced by positive export numbers for the first 10 days of January and renewed concerns over the weather forecaster’s call of more weekend rains in Johor.

Malaysian Palm Oil Board’s (MPOB) bullish December palm oil data failed to contain the sell-off last week. MPOB said output of CPO in December declined 26.27% to 1.144 million tonnes and end-December palm oil stocks were estimated lower by 10.07% while exports of palm oil in December fell by 7.64%.   

Societe Generale de Surveillance estimated the export of Malaysian palm oil products for the first 10 days of January higher at 332,368 tonnes, up 12.6% from the same period in December. China’s purchases amounted to 124,400 tonnes, followed by Unites States with 37,900 tonnes, and India 18,000 tonnes.

The March CPO futures prices plunged from a weekly high of RM1,959 to RM1,853 and settled the week sharply lower at RM1,889, down RM72 per tonne from a week ago.   

Total trading for the week doubled to 85,674 contracts from 43,357 contracts a week ago.

A black big candle occurred last week. This bearish candlestick chart formation suggests that the main trend had turned bearish. For the downward trend to expand further, the March futures prices would have to trade below the RM1,900 level and trend lower to break its daily chart head-and-shoulder neckline support level at RM1,850. Markets normally experience sharp downward pressure when these sort of important technical supports are violated.  

The potential for a significant technical pullback is much higher now than it has been for several weeks. Weekend floods in southern Johor may temporarily delay the resumption of the downward trend. For this week, the March futures has an immediate chart support at the RM1,875-RM1,865 level. Chart resistance for this week is revised sharply lower to the RM1,900-RM1,915 level. 

The weekly oscillators are indicating that the market internally has been pretty weak. Stochastics are on a sell mode and called for more selling pressure. The trend change indicator 3- and 7-week exponentially smoothed moving average price lines (ESA lines) closed the week in strong bearish convergence and suggested that the main trend is about to change its course. Meanwhile, the 9-week Relative Strength Index (RSI) headed south and continues to indicate that the underlying strength of the market is bearish.  

SOYOIL  

CHICAGO Board of Trade soybean oil futures prices dipped in early trading last week dampened by plummeting crude oil prices, large US soybean supply and excellent crop weather in South America. 

Both Brazil and Argentina recorded good rainfall in most of their soybean growing area.  

Prices then climbed towards late trading boosted by the 20 US cents limit up in corn prices. Corn prices are at historic highs and farmers are planning to plant more corn acreage than soybean this spring. To advert further acreage losses, soybean complex prices despite its inherent bearish fundamentals are holding firm to keep pace with corn.

The March futures prices ended sharply higher with gains of 0.75 points at 29.15 US cents per pound. Trade for the week fluctuated widely from a weekly high of 29.28 to 27.67 US cents per pound.   

The weekly candlestick chart turned positive last week following the formation of a bullish engulfing pattern. For the bullish momentum to continue, prices would have to close this week above the current white candle real body at 29.15 US cents. 

Immediate-term chart support for the March futures is adjusted higher to the 28.85-28.70 US cents level. Chart resistance for this week now stands at the 29.35-29.40 US cents level.   

The weekly indicators ended the week neutral to positive and signalled that the market would remain buoyant this week. 

The weekly stochastic closed the week bullish and indicated that the main trend is positive. The weekly ESA lines remained in bearish convergence and failed to show a trend change last week. Meanwhile, the 9-week RSI remained in downtrend and settled lower at 58.11 points and signalled that the immediate underlying strength of the market is neutral.   

COCOA

COCOA futures prices on the New York Board of Trade dropped in early trading last week pressured by funds and speculative selling triggered by the strength in the US dollar and then surged towards late week boosted by aggressive funds covering.

Overall, trading last week was more of a consolidating move, mostly influenced by currency movements.  

Weather conditions in Ivory Coast would play a dominant role in cocoa prices in the near term. Little rain was seen in Ivory Coast’s main growing regions in the first week of January due to the dry harmattan wind which is sweeping down from the Sahara Desert.

The March 2006 cocoa futures prices ranged from a weekly low of US$1,573 to US$1,644 and closed the week slightly higher at US$1,628, up US$21 per tonne from previously.   

The weekly candlestick chart closed the week with a white candle and indicated that the market had regained some of its positive momentum following the sharp sell off previously. 

An important chart support is seen for the March cocoa futures at the US$1,610-US$1,590 level. Breaching of this support would signal the resumption of the downward trend. Chart resistance for this week is lowered to the US$1,640-US$1,650 level.   

The weekly oscillators settled the week neutral and indicated that the main trend is still negative. 

The weekly stochastic retained its sell signal last week and signalled that the market would stay negative. The 3- and 7-week ESA lines remained in bullish divergence on Thursday’s close and signalled that the main trend is positive. The 9-week RSI closed the week lower at 62.06 points and confirmed that the immediate underlying strength of the market is weak.  

TIN

TIN prices on the Kuala Lumpur Tin Market (KLTM) sank to a seven week low in an early sell off last week and then reversed direction sharply in the later part of the week on active overseas demand and firmer LME tin prices. Tin prices finally closed the week off its weekly lows and settled with minor losses.

Spot tin prices on the KLTM finished Friday lower at US$10,701, down US$429 per tonne from previously. Trades for the week ranged widely from US$10,701 to US$10,050 per tonne. Total volume for the week jumped to 334 tonnes from 165 tonnes a week ago. 

The weekly candlestick chart ended the week slightly positive. A long lower shadow candle occurred last week. This is a typically bullish pattern when it occurs near an oversold level. Last week sharp rebound action signalled that the immediate term underlying strength of the market is positive. 

Chart support for this week is lowered to the US$10,600-US$10,500 level. Violation of these supports would mark the start of another wave of downward pressure. Chart resistance for this week stands at the US$10,750-US$10,800 level. 

Most of the weekly technical indicators ended the week bearish and signalled that the market’s underlying setting is negative.

The weekly stochastic remained negative on Friday and called for further downward trading. The 3- and 7-week ESA lines ended the week in strong negative convergence and indicated that the market is entering a bearish phase. The 9-week RSI ended sharply lower at 54.10 points and signalled that the immediate term underlying strength of the market is bearish.

Source: thestar.com