technical analysis of cpo futures (fcpo) price & … · prepared by: benny lee, nextview...

Prepared by:Benny Lee, NextVIEW

[email protected]

TECHNICAL ANALYSIS

OF CPO FUTURES

(FCPO) PRICE &

FORECASTS

Copyright © 2010 NextVIEW (www.nextview.com)

TECHNICAL ANALYSIS OF CPO FUTURES AND FORECASTS

Disclaimer

The author will not be responsible for any losses or loss profits resulting from investment decisions based in the use of the information

contained in this printed material, or otherwise.

This course / printed material is intended to provide accurate and authoritative information with regard to the subject matter covered. It is

taught or distributed with the understanding that the author is NOT engaged in rendering any investment or other professional advice. If

investment or other professional advice is required, the services of a competent professional person should be sought.

CONTENTS:

1. Short term analysis of crude palm oil futures price

Trend Analysis 2

Pattern Analysis 4

Momentum Analysis 6

Supply Analysis 8

2. Short term price forecast (1 to 2 months) 10

3. Medium term analysis of crude palm oil futures price

Trend Analysis 12

Pattern Analysis 14

Fibonacci and Moving Average price objectives 17

4. Medium term price forecast (2 to 5 months) 20

5. Other crucial factor affecting price of FCPO

US Dollar and Chinese Yuan 21

Production and Exports 24



SHORT TERM ANALYSIS

OF CRUDE PALM OIL

FUTURES PRICE(as at 18 January 2011)

1



1. Short term analysis of crude palm oil futures priceTrend Analysis:

30-day moving average



2



Trend Analysis from previous pages:

1. Intermediate term trend, represented by a 90-day moving average is UP

2. Short term trend, represented by a 30-day moving average is UP

3. Price is above these averages and currently supported by the short term

moving average.

4. The relationship between the price and the short to long term moving averages

shows that price is in a steady up trend

* 90-day moving average represents the mid-term traders group and the 30-day

moving average represents the short-term traders group


3



Pattern Analysis:


4



Pattern Analysis from previous pages:

1. Price movement has formed an up trend channel from July 2010.

2. Price is currently at the bottom channel (support) level of the channel. RM3,600

is the current support level

3. Top Channel (Resistance level) is currently at RM4,100


5



Momentum Analysis:


6

Declining volume

Declining Price Momentum

Divergence in Price and Momentum



Momentum Analysis from previous pages:

1. Volume and Momentum (The RSI indicator) is in divergence with the price

trend.

2. The RSI indicator is like a tug of war indicator. The bulls side is above the 50

points level while the bears side is below the 50 points level.

3. The RSI is currently above the 50 points level, indicating that the bulls are still

dominating but because the peaks are declining, the bulls strength is

weakening.

4. Therefore, these indicators suggest that up trend has weakened and there is a

low change that the price is going to make a new high from the current high of

RM3,888 / ton


7



Malaysian Palm Oil supply analysis


JanFeb

FebFeb Feb

Feb

Feb

8



Malaysian Palm Oil supply analysis, from the previous page

1. Supply normally bottoms out in the month of February.

2. Therefore, supply of palm oil is expected to decline at least until February.

3. From the chart, the palm oil production forecast for the next month based on a

three year trend is 1,125,000 tons.

4. Export remains robust. Malaysia's palm oil exports during the Jan. 1-20 period

rose 9.7% from a month earlier, to 852,607 tons, cargo surveyor Intertek Agri

Services said Thursday.


9



2. Short term price forecast (1 to 2 months)

• Price is near the support level and it is natural that we expect price to

rebound.

• Price is expected to rally after the rebound as market is already anticipating

lower supply at least in the next one month.

• However, the price may not be able to move beyond the resistance level at

RM3,800 because of the weak momentum and RM3,800 is technically

overbought.

• There is a strong support level at RM3,600 and if this level is broken, then I would

expect price to move into a major correction/pullback.

The short term forecast is slightly bullish. Price expected to

trade between RM3,600 and RM3,800 in the next two months

10



MEDIUM TERM ANALYSIS

OF CRUDE PALM OIL

FUTURES PRICE(as at 18 January 2011)

11



3. Medium term analysis of crude palm oil futures priceTrend Studies

Parallel line from line L, the extreme

high of the long term trend

Parallel line from line L, the extreme

low of the long term trend

15 years linear regression line, L

12



Trend Analysis from previous page:

1. Price is currently at the extreme high level based on the 15 year regression

channel.

2. Price is overbought and is likely going to consolidate as there is little room to

move on the upside.

3. The regression line median is currently at RM2,600.

13

3. Medium term analysis of crude palm oil futures price



3. Longer term analysis of crude palm oil futures priceChart Pattern

14



3. Longer term analysis of crude palm oil futures price

15

Chart Pattern

necklineX

X

Target

Head and Shoulders

A bearish reversal pattern



16

3. Longer term analysis of crude palm oil futures priceChart Pattern

Target



3. Longer term analysis of crude palm oil futures priceFibonacci retracement

Mid term 38.2 Fibonacci

retracement level

17



Mid term moving average support (90-day moving average)


18



Chart Pattern Analysis from previous pages:

1. The head and shoulders chart pattern is confirmed when price breaks below

RM3,600

2. Target price for the head and shoulders pattern is RM3,300.

3. RM3,350 is the projected medium term 90-day moving average (ref. page 2).

4. Fibonacci retracement for the mid-term, the 38.2% retracement is at RM3,280.


19



4. Medium-term Price forecast 2 to 5 months

The price objective

• Once price breaks below the short term support level at RM3,600, the mid term

pullback/consolidation is expected to begin.

• Based on mid-term moving average price objective: RM3,350

• Based on head and shoulders pattern price objective: RM3,300

• Based on 38.2 Fibonacci retracement level: RM3,280

Therefore, I’d expect price to consolidate between RM3,300 to

RM3,550* in the next 2 to 5 months.

* Monthly volatility is RM250 on average.

20



USD/MYR

FCPO

5. Other crucial factor affecting price of FCPO - US Dollar against

Malaysian Ringgit (USD/MYR)

21

USD/MYR FCPO



5. Other crucial factor affecting price of FCPO - Malaysian

Ringgit against the Chinese Yuan (MYR/CNY)

22

MYR/CNYFCPO

The spread between the Chinese

Yuan and FCPO has closedMYR/CNY

FCPO



1. The Chinese Yuan has a positive correlation against the price of FCPO. The

widening spread on FCPO and Chinese Yuan since last year price has almost

closed, after price of FCPO rallied in the past three months.

2. The US Dollar has a negative correlation against the price of FCPO. The spread

between the US dollar and FCPO widens. Prices of FCPO and USD/MYR are

currently at a level similar to the level in 2008.

3. The strengthening of the Malaysian Ringgit and Chinese Yuan against the US

Dollar is expected to continue in the short term and therefore supporting the

short term slightly bullish target.

4. However, if the US dollar continues to weaken, then price may rally further and

cause the medium term forecast to extend longer.

5. Other crucial factor affecting price of FCPO –

US Dollar and Chinese Yuan

23



5. Other crucial factor affecting price of FCPO

Production and Exports

24



1. Exports and supply was weak for the past two months.

2. While supply may only bottom out in January, Malaysia's palm oil exports

during the Jan. 1-20 period rose 9.7% from a month earlier, to 852,607 tons,

cargo surveyor Intertek Agri Services said Thursday.

3. Therefore, price should increase in the short term at least until the next two

months (as forecasted in the short term forecast earlier – page 10)

5. Other crucial factor affecting price of FCPO –

US Dollar and Chinese Yuan

25



THANKYOU!

[email protected]

technical analysis of cpo futures (fcpo) price & … · prepared by: benny lee, nextview...

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