MPOB Report Key to Market Direction

OBSERVATIONS: The Kuala Lumpur CPO futures market’s pendulum has

swung back up.

This it did in late trade last week when the

actively-traded April 2010 contract broke through on the upside the

erstwhile short term RM2,510 a tonne overhead resistance level. The

contract settled last Friday at RM2,521, up RM79 or 3.24 per cent over

the week.

But whether this market will continue swinging up

depends on developments this week, in particular the Malaysian Palm Oil

Board (MPOB) report, due to be unveiled this Wednesday and, of course,

what market and industry players

make of it.

Speculation, in the wake of January’s robust export estimates, that the

commodity is likely to see a major improvement in its fundamentals was

the main reason this market’s strong price fillip last week.

Speculation, in the wake of January’s robust export estimates, that the

commodity is likely to see a major improvement in its fundamentals was

the main reason this market’s strong price fillip last week.

Export

monitors Societe Generale de Surveillance (SGS) and Intertek Agri

Services (IAS) put January 2010’s exports of palm oil at 1,478,739

tonnes and 1,496,805 tonnes respectively. Although that does not surpass

the record high for palm oil exports of 1,614,720 tonnes registered in

December 2008, the combined average of 1.488 million tonnes is still a

whopping 304,000 tonnes or 25.70 per cent higher than that shipped out

in December 2009.

However, the robust export estimates will need

official confirmation and all eyes this week on the Malaysian Palm Oil

Board’s (MPOB) report on January 2010 trade data and end-January 2010

palm oil stock position, due out this Wednesday.

Conclusion:

The MPOB report on January 2010 trade data and stocks will be critical

in determining whether this market can maintain its bullish momentum.

The

technical indicators as of last Friday, on balance, were more bullish

than bearish.

HOW TO USE THE CHARTS AND INDICATORS

THE BAR AND VOLUME CHART: This is the daily high, low and

settlement prices of the most actively traded basis month of the crude

palm oil futures contract. Basically, rising prices accompanied by

rising volumes would indicate a bull market.

THE MOMENTUM INDEX:

This line plots the short/medium-term direction of the market and may be

interpreted as follows:

(a) The market is in an upward direction

when the line closes above the neutral straight line and is in a

downward direction when the reverse is the case.
(b) A loss in the

momentum of the line (divergence) when prices are still heading up or

down normally indicates that the market could expect a technical

correction or a reversal in the near future.

THE RELATIVE

STRENGTH INDEX: This indicator is most useful when plotted in

conjunction with a daily bar chart and may be interpreted as follows:

(a) Overbought and oversold positions are indicated when the index

goes above or below the upper and lower dotted lines.
(b) Support

and resistance often show up clearly before becoming apparent on the bar

chart.
(c) Divergence between the index and price action on the

chart  is a very strong indication
that a market turning point is

imminent.

The subject expressed above is based purely on

technical analysis and opinions of the writer. It is not a solicitation

to buy or sell.

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