CPO outlook as at August 6th, 2008

In line with my expectation that crude oil prices may put in a rebound after testing the long-term uptrend line support of USD110, I will now take a look at the CPO market outlook. Unfortunately, I do not have accessed to a good chart on CPO prices, except for ifs.marketcenter.com (go here). As the period covered in the current chart is very narrow, I have to combine a portion of the current chart with an older chart (from here). The less-than-happy result is given below.

How to see the chart below? Your mind's eye should piece together the bigger left-hand chart with the smaller right-hand chart (guided by the marker "< A" and "A >"). From this, you can see that the strong horizontal support, at about RM2400 is coming soon. CPO Futures for October closed the morning session at RM2759.


Chart 1: CPO's weekly chart as at August 6th (source: ifs.marketcenter.com)

From Chart 2 below, we can see that Plantation index has broken below the immediate uptrend line support of 6500 three weeks ago. The next supports are the horizontal support of 5200 & 5000 as well as long-term uptrend line support of 4400-4500.


Chart 2: Plantation's weekly chart as at August 6th (source: Quickcharts)

When CPO reaches the RM2400-2500 level and the Plantation index comes nearer to the 5000-5200 level, one may look through the list of desirable plantation stocks to invest in. One stock that will feature very high on that list is Sime. From Chart 3 below, we can see that Sime has dropped from its recent high of RM13.40 in January 2008. At the closing price of RM7.15 yesterday, Sime has declined by 47% compared to a 36%-drop for Plantation index (from a high of 8949 to yesterday's close of 5033). Sime's immediate support is at RM7.00 while the very strong horizontal support thereafter is at RM6.30 level.


Chart 3: Sime's weekly chart as at August 6th (source: Quickcharts)