Palm Oil Seen Dropping to Lowest Since May: Technical Analysis

Palm, the most-consumed cooking oil, will probably decline 4.5 percent in the next two weeks to the lowest level since May as it remains in a downward trend, according to a technical analysis by RHB Investment Bank Bhd.

The most-active contract on Bursa Malaysia Derivatives may drop to 2,250 ringgit ($710) a metric ton, a support level that the commodity couldn’t break in late April and early May, said analyst Mohammad Ashraf Abu Bakar, who has predicted prices for the past five years. The oil’s long-term trend is definitely still down, Mohammad Ashraf said by phone in Kuala Lumpur.

Support levels refer to prices at which buy orders may be clustered. Futures ended at 2,250 ringgit on May 6, the lowest price at close for the most-active contract since December. Palm, used in foods and fuels, has dropped 3.4 percent this year and was at 2,355 ringgit at the market’s midday break.

“Weakness is reinforced by the longer-term, negative death cross of the 50-day and 200-day moving average lines,” he said. “The death cross is a long-term indicator. The series of lower highs that started in April 2012 is still not broken. That’s the clearest indicator that things are really still weak.”

Palm oil’s 50-day moving average has been below the 200-day moving average since June 29, 2012. The pattern, known as a death cross, is a bearish indicator to investors and analysts who study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

 

Source : Bloomberg

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