Dear Friends & Associates,
Greeting! We are back after a prolong “shutdown” due to circumstances only known to me!
We are indeed happy to be with you again and hope to be of some good services to you. Cheers!
Stay Cautiously Bullish In Days Ahead.
Traders are now faced with this multi-million ringgit question.
Is the CPO market currently meeting strong overhead price resistance OR are prices being held up simply due to buying support from positive underlying strength of the market?
From the early-October rally-base level of RM2,300, CPO futures prices rallied nearly RM320 and hit a rally-high of RM2,632. There were three downward adjustments or price correction during this one-and-a-half month bullish-move. The sharpest technical correction took prices last week from RM2,600 to RM2,500 and was followed by a strong upward-surge that saw prices re-visiting and testing the rally-highs above the RM2,600 for four occasions last week and settled Friday with Jan, Feb & Mch futures above the RM2,600 level.
Is this market in a calm-before-the-storm stage and finally enter into a sharp decline OR would the market continue to rally and make fresh highs in days ahead?
Let us examine some important trading factors in order to get a clearer picture from the current state of opaqueness.
Firstly, our weekly GMT Trend-Tracker (GMT-TT) signal that has been extremely spot-on so far in 2013, gave the weekly buy-signal on 4th October. The weekly GMT-TT stayed constructive during last Friday’s close and indicated that the main trend or cycle is still positive and has the potential for further advances. (please see BMD chart)
BMD –CRUDE PALM OIL – FEB14 FUTURES
Secondly, let us examine the health of the market by looking at what is significant – the volume and open-interest or size of the market which determines the sustainability of this bullish rally. Total weekly volume of the two most actively traded months Jan & Feb increased significantly last week. Jan weekly volume rose from 74,428 contracts (25 mt per contract) to 93,108 contracts last week and the Feb weekly volume jumped to 34,440 contracts from 24,389 a week ago. Meanwhile, the week-ending open-interest for Jan futures increased from 253,101 contracts previously to 287,041 contracts last week and the Feb open-interest soared to 124,837 contracts from 96,977 contracts a week ago. Analysis of the latest open-interest and volume suggests that the buyers are the aggressive lot and fresh buying at higher levels along with higher volume and open-interest last week showed that the underlying tone of the market is still bullish. The basic technicals of the market says that if price is up along with significant increases in volume and open-interest, the bullish trend would expand.
Thirdly, let us take a look at the latest chart-picture. Futures prices closed Friday at its highest level in 2013. The formation of a bullish double-top configuration signalled the prospects for further extension to the upward rally.
Normally, an upward-break of a double-top resistance would result in the resumption of the main trend.
Where then would the market go in the event of a successful penetration of the double-top price resistance of RM2,635-2,650 levels this week?
Our technical guess is it would likely advance to test the RM2,680-RM2,710 levels. However, it would also be good if we can take the cautiously-bullish approach because based on the daily chart, an important technical-support is now pegged at the RM2,550-RM2,525 levels. Violation of this important support would signal the end to this seven-week old rally and mark the end to this party. You have been informed! Please remember that people make markets and they are irrational much of the time.
Lastly, let us look at the supply/demand fundamentals.
Malaysian October, 2013, CPO output at 1.972 million tonnes is the highest for this year compared to the same monthly output in 2012 at 1.938 million tonnes. If the North-East Monsoon rains does not disrupt the settings, I believe we have yet to see the production peak for 2013.
Malaysian end-October palm oil stocks at 1.845 million tonnes is gradually on the rise from end-June, 2013 lows of 1.647 million tonnes. Pressure on CPO prices may mount in the event of such an eventuality. Malaysian end-month stocks near the two million tonnes would likely trigger-off another round of price crisis. I understand Indonesian’s palm oil stock is presently around 2.4-2.6 million tonnes.
CPO price are at their best levels after having rebounded from the 2013-lows of RM2,255 last seen in July 2013. The north bound trend may continue with many knee-jerk actions along the way.
MALAYSIAN CPO OUTPUT/MONTH–END STOCKS & PRICE
INDONESIA COMMODITY & DERIVATIVE EXCHANGE (ICDX)
The Indonesian Commodity & Derivative Exchange (ICDX) crude palm oil futures remained bullish on Friday’s close.
The GMT Trend-Tracker maintained its buy-signal and called for the continuation of the upward trend (please see chart).
An immediate overhead objective is now seen at the IDR 9,400-IDR9,550 per kilo levels if the upward double-top price break-out occurs. Much of the technical reading on the ICDX CPO futures remains the same as Malaysia’s BMD.
ICDX –CRUDE PALM OIL – FEB14 FUTURES
MAKE A DATE WITH G.M.TEOH & DEVELOP A PROFESSIONAL TRADING EDGE FOR CONSISTENT HEDGING RESULTS.
The next Palm Oil Master Trader Tutorials (MTT) conducted by me and organized by GBWORKS would be held in Kuala Lumpur in early-March 2014, ahead of the POC 2014.
For course details and registration kindly check out at “register-now” at www.palmoil-mtt.com or contact me. Thank you.
I shall be presenting an afternoon paper at the MPOB INTERNATIONAL PALM OIL CONGRESS (PIPOC) 2013 in Kuala Lumpur (KLCC) on 21st November. I would also be at the PORAM Annual Dinner on the evening of 22nd November. It would be great for us to meet at the side.