More downward pressure ahead on palm oil

CRUDE palm oil futures prices at the Bursa Malaysia Derivatives entered into a bearish cycle last week dampened by the ringgit de-peg, slower export estimates and losses in the Chicago Board of Trade soyoil futures prices and closed Friday at its worst level in six weeks. 

The removal of the seven-year-old peg of RM3.80 to the US dollar prompted a late round of aggressive producers hedge-selling from both Malaysia and Indonesia. Producers feared that a firmer ringgit against the US dollar in the coming months would pressure crude palm oil prices and erode on their profits. 

Cargo surveyor Societe Generale de Surveillance (SGS) estimated the Malaysian exports of palm oil products for July 1 to 20 sharply lower by 26% to 642,032 tonnes compared to 867,479 tonnes in the same period a month ago. 

The October futures ended the week at the tail-end of the intra-week’s low at RM1,382, down RM36 per tonne from previously. Trade for the week fluctuated widely from RM1,423 to RM1,378 per tonne. 

The candlestick chart ended the week bearish and called for the continuation of the downward cycle this week. An important chart support at the RM1,410-RM1,400 level was breached last week and measurement of the next downside target shows that the market will test its seven-week low at the RM1,360-RM1,350 level. A successful downward breakout from this level would set the course for the expansion of the bearish trend in the near-term. 

Chart resistance for this week is seen lower for this week at the RM1,395-RM1,410 level.  

The daily oscillators ended the week negative and signalled the resumption of the downward cycle this week.  

The oscillators per cent K and D ended the week lower at 41.93% and 43.85% respectively.  

The daily MACD closed the week bearish. The MACD and the trigger line closed in the negative territory at -2.04 and -0.47 points respectively. 

The exponentially smoothed moving average price (ESA lines) remained bearish on Friday’s close. The 3-week and 7-week ESA lines ended the week with a strong negative divergence at 1,395 points and 1,405 points respectively and indicated that the bearish momentum would expand. 

Meanwhile, the 9-day RSI declined from a weekly high of 47.67 points on July 18 and closed sharply lower at 25.97 points. Analysis of the daily RSI indicates that the immediate term underlying strength of the market is still weak.  

SOYOIL futures prices on the Chicago Board of Trade declined on long liquidation pressure and slipped to a 3-week low last week as commodity funds sold aggressively following rain in the US Midwest soybean growing areas. 

Forecasts for cooler and wetter weather in the main soybean producing states of Iowa and Illinois kept the bulls at bay. 

Traders think that the much-needed rainfall that finally arrived would improve the US soybean crop. The United States Department of Agriculture said that the US soybean conditions fell one percentage point with 53% of the crop rated as good to excellent last week. 

The August soyoil futures prices fell from a weekly high of 25.86 US cents to 23.95 US cents and rebounded slightly to settle Thursday sharply lower at 24.31 US cents, off 1.17 US cents per pound from previously. 

The daily candlestick chart finished the week bearish and indicated that the newly developed downward momentum would sustain.  

Chart support for the immediate term is seen at the 24.15-24.00 US cents levels. Violation of this support would bring on fresh selling pressure and take values lower to test its 4-week low at the 23.50-23.30 US cents level. Chart resistance for this week is adjusted lower to the 24.50-24.75 US cents level.  

The daily technical indicators closed the week mostly bearish and indicated that the immediate cycle of the market is negative. 

The daily stochastic triggered the sell signal on July 18 and managed to remain negative on Thursday’s close. The oscillators per cent K and D settled sharply lower at 18.41% and 31.50% respectively. Analysis of the stochastic indicates that downward trend would expand.  

The 3-day and 7-day exponentially smoothed moving average price line (ESA lines) triggered the sell signal on July 19 and confirmed that a bearish cycle has started. The 3-day and 7-day ESA lines settled at 24.57 points and 24.82 points respectively. 

The daily MACD triggered the bearish signal on July 18 and signalled the beginning of a downward trend. The MACD and trigger line settled the week negative at 0.19 points and 0.25 points. 

The 9-day RSI dropped from a weekly high of 60.64 points and ended the week lower at 41.45 points. Analysis of the RSI indicates that the immediate underlying strength of the market is bearish.  

COCOA futures prices on the New York Board of Trade made a couple of rally attempts on speculative buying early last week but the move was short-lived as selling from producers and a rising US dollar erased all the earlier advances and finally closed Thursday with small gains. 

The September cocoa futures ranged from US$1,443 to US$1,391 per tonne and ended Thursday slightly higher at US$1,407, up US$2 from previously.  

The candlestick chart closed the week negative and called for further sideways to lower trading this week. An immediate chart support is seen at the US$1,400-US$1,380 level. A successful break below this 3-month old chart support would turn the immediate chart picture negative and send prices lower to test its minor support at the US$1,350 level. Chart resistance for this week is adjusted slightly lower to the US$1,420-US$1,435 level. 

The daily oscillators finished the week mixed and signalled the prospects for more bands trading this week.  

The daily stochastic gave the sell signal on July 19 and confirm the start of a downward wave. The daily oscillators per cent K and D settled the week negative at 36.55% and 54.78% respectively. 

The 3-day and 7-day exponentially smoothed moving average price lines (ESA lines) triggered the sell signal on July 20 and stayed negative on Thursday’s close. Both the 3-day and 7-day ESA lines settled at 1,410 and 1,414 points respectively.  

The daily moving average convergence/ divergence (MACD) ended the week with a strong negative convergence and signalled that a bearish cycle is about to start. The MACD and trigger line ended the week lower at -18.14 and -18.22 points respectively. 

The 9-day Relative Strength Index (RSI) dropped from a weekly high of 50.33 points and closed the week higher at 39.94 points. Analysis of the daily RSI shows that the immediate underlying strength of the market has turned slightly negative.  

TIN prices on the Kuala Lumpur Tin Market rebounded strongly in early trade last week but the move was hampered by renewed selling interest that pressured prices off sharply from their weekly highs and finally closed the week with small gains. 

News of the de-pegging of the ringgit against the US dollar had limited impact on trading. Tin prices fluctuated widely from US$7,390 to US$7,150 and ended higher at US$7,190, up US$15 from previously. Total volume for the week dipped marginally to 326 tonnes from 335 tonnes a week ago. 

The candlestick chart closed the week slightly negative. Last week’s black candle shows that the market is likely to face strong overhead resistance around the US$7,350 per tonne level. 

Chart support for the immediate term remains at the US$7,100-US$7,050 level. The immediate-term outlook will remain positive if these levels are not successful violated.  

The weekly oscillators again ended the week mixed and called for further congestion this week. The weekly stochastic ended the week positive with the oscillators per cent K and D higher at 25.33% and 14.38% respectively. Analysis of the stochastic indicates that the technical recovery is still in place. 

The weekly moving average convergence/ divergence (MACD) retained its sell signal last week and called for more downward pressure this week. The MACD and trigger line settled at -0.27 and - 0.26 points respectively. 

The trend indicator 3-week and 7-week exponentially smoothed moving average price lines (ESA lines) held on to the negative divergence and indicated that the downward cycle is still intact. The 3-week and 7-week ESA lines closed lower at 7,209 and 7,359 points respectively. (mes)

Source : http://biz.thestar.com.my