CPO lower on long liquidation pressure

CRUDE palm oil futures prices at the Bursa Malaysia Derivatives advanced to fresh contract highs in early trading last week boosted by strong soybean oil prices and a weaker ringgit.

The bullish rally lost steam with prices retreating strongly on long liquidation and hedge selling pressure to finally close the week with small losses.
The forecast of hotter and drier US weather and a slight decline in soybean progress rating encouraged people who were bearish earlier to cover their short positions in crude palm oil. Higher crude palm oil production over the last two weeks also helped in softening market sentiment.

Cargo surveyor Societe Generale de Surveillance’s estimated Malaysian palm oil products exports for the full month of July higher by 8.3% to 1.09 million tonnes compared with 1.007 million tonnes a month ago.

China remained the largest buyer with 303,585 tonnes, followed by United States with 138,932 tonnes and Pakistan with 77,496 tonnes. European Union and other countries purchased a total of 187,579 tonnes.

October futures prices retreated from a weekly high of RM2,665 to RM2,552 and finished the week lower at RM2,582, off RM1 per tonne from previously.

Total volume for the week increased to 61,227 contracts from 42,458 contracts a week ago. Open interest as at Thursday’s close advanced to 71,225 contracts from 65,627 contracts previously.

The daily candlestick chart closed the week slightly negative and continues to show that the immediate-term momentum of the market is weak.


CPO
The October futures has an important chart support for this week at the RM2,570-RM2,560 level. The market trend would turn negative if this level is violated. Chart resistance for this week is adjusted lower to the RM2,600-RM2,610 level.

The daily oscillators closed the week bearish and suggested that negative momentum would remain this week.

The daily stochastic remained bearish on Friday’s close and signalled that the downward cycle would continue.

The oscillators per cent K and D ended lower at 41.36% and 55.44% respectively.

Meanwhile, the 3- and 7-day ESA lines remained in negative convergence and indicated that the main trend is turn negative.

The 5-day RSI ended lower at 52.32 points. Analysis of the RSI indicates that the market’s immediate underlying strength is negative.



SOYOIL




Soyoil
SOYOIL futures prices at the Chicago Board of Trade initially trended higher on forecasts of hot, dry weather in many parts of the US' Midwest and reacted positively to the decline in soybean condition rating.

Higher crude palm oil prices and stronger New York crude oil prices also aided the earlier sentiment.

Reduced participation from traders amid jitters about subprime mortgage problems and downward pressure on crude palm oil market forced the soyoil futures to return a large portion of its earlier gains during mid-week and finally closed Thursday with moderate gains.

The US soybean crop is in its main pod-setting phase of development and hot weather can cause yields to drop.

Rains would be needed in the next two weeks for favourable conditions for filling beans.

According to USDA’s latest report, the soybean crop had deteriorated in the last seven days. USDA reported that 58% of the crop was rated in good to excellent conditions, off from 61% a week ago.

The September futures prices declined from an intra-week high of 38.18 US cents to 37.36 US cents and settled the week moderately higher at 37.64 US cents per pound, up 0.61 US cents from a week ago.

The daily candlestick chart remained neutral to slightly negative. Wednesday’s large black candle showed that the immediate-term trend of the market is weak.

The September futures may continue with its downward cycle and have an immediate chart support at the 37.30-37.10 US cents level.

Chart resistance for this week is revised lower from a week ago to the 37.70-37.80 US cents level.

The daily indicators remained slightly positive for the price chart and signalled that the market would expand on its sideways to lower trading this week.

The daily stochastic retained its buy signal and indicated that the market is not out of its positive cycle.

The oscillators per cent K and D settled lower at 79.41% and 70.70% respectively.

The 3- and 7-day ESA lines closed in bullish divergence and indicated that the market’s immediate-term trend is still constructive.

Meanwhile, the 5-day RSI declined from its recent high of 73.49 points and closed lower near the neutral territory at 54.40 points. Analysis of the RSI showed that the underlying strength of the market is weak.

COCOA




Cocoa
COCOA futures prices on the New York Board of Trade fell to a seven-week low in an early round of selling and congested in a narrow band before closing the week with minor losses.

Selling pressure from funds and commission houses' long liquidation and a firmer dollar weight on prices forced the market to make new decline lows.

Traders generally remained bearish following news of a good main crop in West Africa. Weather forecasts calling for scattered showers and thunderstorms favour the developing main crop there.

The September cocoa futures prices dropped from a week’s high of US$1,948 to US$1,900 and settled the week sharply lower at US$1,914, down US$58 per tonne from previously.

The daily candlestick chart closed the week slightly negative and suggested that trading would remain locked in a tight band this week.

Last week’s three “doji” candles indicated that the market is in an uncertain phase and is awaiting fresh leads for the next move.

Chart support for this week is lowered to the US$1,900-US$1,880 level. The immediate term trend would turn negative if this level is breached this week.

Chart resistance is pegged at the US$1,940-US$1,955 level.

All the daily indicators closed the week bearish and called for further downward pressure this week.

The daily stochastic triggered the sell signal on July 31 and indicated that the market is in a extended bearish move.

The 3- and 7-day exponentially smoothed moving average price lines (ESA lines) ended in bearish divergence and showed that a negative cycle had started.

Meanwhile, the 5-day Relative Strength Index (RSI) declined sharply to the oversold level of 28.69 points on Thursday’s close.

Analysis of the RSI showed that the market’s immediate underlying strength is bearish.

Source: biz.thestar.com.my