CPO Futures - Rebound Closed 3600 Gap

Price rebound off recent low is still in progress while its longer term outlook is now neutral to up. The recent selling is over for now as price managed to make a higher high last week (chart 1) and closing above the 3600 resistance level.

The closing of 3600 is significant as it nullify the brearish bias of the gapdown created 2 weeks back. Therefore, closes above that level will give an upward bias to the longer term trend. Similarly, there are still plenty of upward biases evident:

1) Two weekly hammers suggest price bottomed above 3300 (chart 3);

 2)The up trendline that connects July and Oct low is still intact (chart 2);

3) Moving average still points up on weekly basis (chart 3);

4) Ringgit has yet to show signs of weakness; and

 5) RSI is the lowest in the past 8 mth, which could mean price is oversold.

Nonetheless, the breakaway gap of 3800 is yet to be closed and if indeed price is strong, it has to close the gap to erase all traces of brearishness and the first step is a close above 3700. Beanoil too is again testing recent high and break above should provide good confirmation. Similar move should also be seen in the grain complex. Note however that beanoil is leading the rebound at the moment. Otherwise, a price below 3600 may see sellers returning.

Another thing, CPO is rebounding with weaker momentum in the past week, making marginal high along the way, thus creating a wedge like pattern (chart 1). It is usually a contiuation pattern, meaning a return in selling in this case, but never guaranteed. Look for price to trend on direction of break on successful violation.

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CPO Futures - Trend Resumes

Price may have resumed its uptrend though a close above 3900 is required to confirm it. Again, the longer term trend remains up despite the month long consolidation. It is still above its weekly moving average (chart 3). Signals of change of trend yet to surface though we do note that price stayed overbought for a long time, much longer than it did during the last great rally.

Bottom was likely made at 3600 as two white candles was charted right above it and this level should serve as intermediate support going forward. Price look to have resumed its uptrend as:

1) Highest closing price since late Dec high;

2) Daily RSI has broken its downtrend line; and

3) Stochastic is back in buying mode.

But price needs to close above 3900 to confirm the move which should simultaniously confirm the break in RSI. The firmer soybean oil is also positive for CPO, it finally closed above 1.80, and that too was on a Friday. Similarly, the grain complex continue to surge higher. Nonetheless, if price fails to close above 3900 and then 3600 is broken, expect selling pressure to continue.

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Crude Palm Oil Futures - New Up-Cycle?

Price may have made a short term bottom while the longer term uptrend is still intact. We note that there is yet a change in the longer term picture, which is up (chart 2 &3). Price likely have made short term bottom as:

1) Daily stochastics was oversold and now back into buying mode (chart 2),

2) 30 min RSI was at its lowest last week, not seen since Nov (chart 1),

3) Price bottom was right at 4 month uptrend since Oct (chart 2),

4) Price corrected about 62% Dec rally,

5) Gap up right after bottoming on Monday (breakaway gap?), and

6) Recent bottom was 37 days after Nov bottom, keeping to the 35 day cycle.

As such, should the new cycle be up, it has to trade above January high of 3905. This should also coincide with beanoil trading closing above 58.5 resistance level and above MYR1.80. Note that while CPO retraced for about 2 weeks, beanoil had a sideway movement. Note too that the grain complex was strong last week, with all corn, wheat, soybean and soybean meal closing at rally high.

Also, the bottom makes 3600 level and important intermediate support level. A good up- cycle has to close above 3600 to keep its upward tendencies going. Otherwise, expect selling to intensify.

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Crude Palm Oil Futures - Extended Consolidation?

Price is on short term downtrend though uptrend in the longer term is still intact. There is yet a clear sign of change in trend in the longer term basis despite the weak Friday close (chart 3). But we do note few negative signals which price has to overcome if indeed uptrend is still good.

The short term trend looks weak as: 1) 14-day uptrend line is broken (chart1); 2) 50-period moving average is broken and is pointing down (chart 2); and 3) price fail to close above early week low of 3790.

Nonetheless the longer term picture is still positive as it above weekly moving average and trendline while none of the support levels broken yet. In fact, if the 35 day cycle still plays out, we may find intermediate term bottom soon as we are on day 33. It might also see coinciding bottom in RSI.

Meanwhile sign of weakness evident are: 1) Failure to break above 3900 and closing below 3800 psychological level and 2) Inability of beanoil to close above RM1.80 for 3 weeks now.

Therefore, the 3800 likely be the important level to watch going forward, a close above it signals upward bias is still present while further close below it may see increase in selling pressure. A strong market should also see beanoil trading above 1.80.

A side note, the fall in Dec export is not dissimilar to what happened last year.

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CPO Futures - Uptrend Still Good

We believe bias is still up on the short term basis while, uptrend on the longer term is still intact. There is yet any clear sign of changing trend in longer term basis despite the bearish engulfing pattern on weekly chart two weeks back (chart 3). The strong move last week have somewhat eased the bearishness though a close above 3750 is required to completely erase any possible weakness.

The shorter term trend is also looking up. We believe price has recently made bottom at around 3450 as:

1) 30 min RSI was oversold, lowest since 3100 bottom;

2) Daily stochastic may have turned back into buying mode;

3) Nov high of 3450 turning support;

4) Last week upmove retraced more than 61.8% of 3750 – 3470 downmove;

5) The grain complex are moving higher again, new high in corn, soybean and beanoil and

6) 3470 bottom is 17 days after 3100 bottom, possible midway of 35 day cycle.

However, price has to close above the 2 day high of 3675 to confirm the bullish bias. Price may turn weak on close below 3640 and expect selling pressure to increase on close below 3500 and definitely 3470.

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FCPO - A Thrid of Cycle Through

Price is still on uptrend on both short and longer term basis. On short term basis price is above moving average (50-period) and charting higher lows (Chart 1). No sign of changing trend too in the longer term as all techinical signal is still positive (Chart 2 and 3).

But we do note that momentum has weakened based on:

1) Divergence in the daily RSI, and

2) Break of sharp uptrendline on 30 mins chart.

Therefore, the question is how much higher will this new upcycle go? Late november low of 3100 should be lastest bottom based on:

1) Recent daily RSI and stochastic bottom,

2) Oversold RSI on 30 mins, and

3) Cycle sequence of 35-25-34.

We are entering day 13 of new cycle and if upcycle continues, we should have at least another 5 day of higher prices and first signal should be a close above 3640, tested 3 times in the past 2 days. If we are already at mid-cycle, two signs to look for are the failure to close above 3640, break below MA and finally then a close below 3525 (RSI low in Chart 1) in coming few days.

Notice too than beanoil is testing its Nov high, and reaction to the test may also provide lead. Then expect both CPO and beanoil to move together. Looking at equities, currently there is a divergence where come stocks are making all time high while IOI and Sime is similar to CPO, yet to make new high. If the new highers are leading this rally, then expect further upside.

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Crude Palm Oil Futures - Consolidation/Correction?

On the very short term basis, trend is down. It can be clearly seen through the 30mins chart above, where the downward trendline connects recent top at 4500, 4000 and about 3500.

However on the bigger picture, trend has yet to turn down. Therefore it is likely that price is looking for bottom, correcting or consolidating the recent uptrend. Note too that, price range is volatile, making a low risk trade difficult.

Nonetheless, there is two ways of looking at the latest move. First on the very short term downtrend, it should continue as long as the down trendline is not broken. The various support resistance lines are 3265, 3200 and 3100.

Second, looking at it as a correction of the uptrend; as such, waiting for cycle bottom for long swing entry.  On that basis, the 3100 appears as a possible bottom as:

1) 30mins RSI is at its lowest since August,

2) 3100 was a previous resistance and turned support last Thursday with long positive candle,

3) could enter into a new cycle as it has been 32 days since early October bottom

However, it is also contingent on beanoil staying above 48 and better still above the 50 psychological level. Expect further selling if price trades below 3100.

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