Dear Friends & Associates,

It was a pleasant opportunity to have met you at Bali IPOC. Thank-you for registering for this free bi-weekly Palm Oil Analysis & Price Outlook Report.

I would like to believe many of us left the GAPKI’s IPOC in Bali assured that CPO prices would be on a bullish path for the first-half of 2012.

Many of us would be in for some rude surprises. If ever the analyst’s predictions based on the current supply/demand scenario are correct, CPO prices would not be expected to move upwards on a straight line. We are expecting to see price turbulence accompanied with some wild choppy trading range for the next six months.

CPO price trend for the short to medium term?

Based on my very effective trend-tracker exponentially-smoothed average (ESA), the immediate-term direction of the market is positive following the nine days downward adjustment. (please see BMD CPO chart).

Analysis of Elliot-Wave count suggests that we are now in the 2nd wave or (b-wave) of the Elliot-Wave 3-waves (a-b-c) correctional-move count.

Assuming that the “b-wave” were to expand, the upside for the very immediate term would be around the immediate resistance levels of RM3,140-RM3,160.(see chart).

If the underlying strength of the market is solid, we would see a resumption of the correctional rally from this point. Minor chart resistance at the RM3,200-RM3,250 levels may be re-visited under such circumstances.

In normal circumstances, the Elliot-Wave “c-wave” is a downward wave and the strength of this move would determine the overall direction of the market. In any case, the minor technical support of the market is now pegged at RM3,000 and if violated would signal that the CPO market is back to its bearish cycle.

Presently, CPO futures prices are in a mild RM15 to RM10 contango, meaning the future months CPO prices are at a slight price premium to the nearby months, reflecting storage charges, interest rates and insurance. The contango nature of the market shows that the immediate term supply situation of the market is normal and there no tight supplies.

Open-interest, defined as the size of the futures market, has remained steady above the 30,000 contracts (basis Feb futures) for the last two weeks despite price weakness. Meanwhile, the volume showed a steady decline. Analysis of the price, volume & open-interest shows that weakness over the last two weeks was on account of long-liquidation pressure and whatever selling that occurred was well absorbed by fresh buying.

The ICDX CPO February futures prices rebounded strongly after seven days of declines and looks set for further advances.  Daily trading volume has been on the advance with total  open-interest hovering slightly below the 1,000 contracts.

Elliot-wave count shows that the market has ended its first phase of its downward correction at “a” and has now enter into its second wave or “b-wave” of the three-wave correction.(see ICDX chart). This upward momentum backed by fresh buying and technical short-covering is likely to take prices to test the immediate chart-hurdle at the IR9,100-IR9,150 levels. A successful break above these levels would signal the resumption of the upward momentum and likely send prices higher to the IR9,250-IR9,300 per kilo levels.

The trend-tracker 2/5 ESA lines triggered the buy-signal and entered into a bullish divergence phase. This bullish development indicates that  the shortterm trend would remain constructive. (see chart).

Immediate support for the ICDX February futures is seen at the IR8,700-IR8,800 levels. Breaching of these supports would signal that the main trend has turned negative.

ICDX would be launching the RBD Olein futures contract on December 9th,2011 and we wish them the very best of success.

Please feel free to share this Palm Oil Trend Analysis and Price Outlook Report with your friends in the Palm Oil industry.

Thanking you in anticipation,

Sincerely Yours,
(Chief Coach – Master Trader Tutorials)