Tuesday, June 16, 2009

CPO to the test the crucial support at RM2320

Since my last post on May 21, where I'd warned about the impending correction in CPO prices, the same has dropped from RM2700 to its current price of RM2400. A close study of the daily chart revealed the price correction has taken the shape of a Head-and-Shoulder (H-&-S) formation. As all chartists are well aware that a reading from a H-&-S formation is a very reliable reading. CPO's future direction lays in the outcome of the test of the neckline of the H-&-S formation. A break below the neckline of an upright H-&-S formation will be a bearish reversal, while a break above the neckline of an inverted H-&-S formation would be a bullish reversal. In the case of CPO, we are awaiting the former, where a bearish reversal would be flagged if CPO prices broke below the RM2320 level. The opposite could happen, whereby CPO prices could rebound off the neckline & march higher.


Chart 1: CPO's daily chart as at June 15, 2009 (source: ifs.marketcenter.com)

If CPO were to break below the neckline of the H-&-S formation, then it would likely to drop to its short-term uptrend line support of RM2100. At lower level, it may find support at the horizontal line of RM2000.


Chart 2: CPO's weekly chart as at June 15, 2009 (source: ifs.marketcenter.com)

2 comments:

teh said...

Hi Alex,

I have a IOICORP in hand do uthink i should sell it out?
I keep it for 9 months adi but stil in 4.5 to 4.7 althought i bought RM5.

Alex Lu said...

Hi teh,

IOICorp rallied off the low in October 2008- all the way to early January this year. After a short bout of correction, the stock has been inching upward very slowly. I think IOICorp is likely to drift lower & will only find support at the 100-day SMA of RM4.30-40 before we see any recovery. You may hold onto this blue chips as long-term investment or you may sell it & deplore the funds to something a bit more nimble.