Plantation Index may have broken its short-term uptrend

The Plantation index has broken to the downside of its short-term uptrend line at 7900 (see Chart 1 below). Presently, it is holding at the immediate horizontal support of 7650. The next horizontal support is at 7200. If the index broke through these 2 supports, it may test to the next uptrend line support of 6400. If this level also failed, the medium-term uptrend line that stretches back to June 2006 might be tested. That uptrend line support is at 6000.

From the weekly Chart 2 below, we can see that Plantation index has accelerated over the past 2 years. This is in line with the steady rise in CPO index (see Chart 3 below). However, the recent correction in CPO prices from a high of RM3400 per tonne to RM3100 per tonne has led to some profit-taking for plantation stocks. This profit-taking was happening at a bad time, as equity markets whole wide was roiled by heavy selldown.

Based on the above, it may be advisable to take some profit from your investment in the plantation stocks. As the medium-term uptrend line is still intact, you should buy back these stocks when they have eased sufficiently, or when the Plantation index has tested its next uptrend line & recovered from it.


Chart 1: Plantation's daily chart as at January 29 (courtesy of Quickcharts)



Chart 2: Plantation's weekly chart as at January 29 (courtesy of Quickcharts)



Chart 3: CPO's daily chart as at January 21 (from Palmoil.com)