Monday, February 27, 2012

CPO may have a bullish breakout

Plantation stocks had rallied over the past 4 months to test its all-time high in early 2008, at the 8900 mark (see Chart 2). Plantation stocks are currently experiencing a mild correction. From Chart 1, we can see that the medium-term uptrend line support for Plantation index is at 8600. If that support is violated, the index's next support will be the horizontal line at 8000.

The recent rally in Plantation index was achieved even without a substantial rise in the prices of CPO. CPO prices broke above its intermediate downtrend line in November and since then, it has been consolidating in an ascending triangle. And, yet we have seen substantially better financial performance for many plantation companies during the current reporting season. We can only conclude that these companies must have benefited from increased production of FFB.

Imagine how the plantation stocks will perform if CPO prices were to rally. Today, CPO has just broken above the ascending triangle at RM2560. CPO futures contract for April is currently trading at RM3275- a gain of RM14.

Based on bullish breakout for CPO prices, we should maintain our bullish stance for plantation stocks.

Chart 1: Plantation's daily chart as at Feb 27, 2012_10.30am (Source: Quickcharts)

Chart 2: Plantation's weekly chart as at Feb 27, 2012_10.30am (Source: Quickcharts)

Chart 3: CPO's weekly chart as at Feb 24, 2012 (Source:


chanhoo said...

Hi Alex,
Mudajaya is trading around RM2.80- RM 3.00 this few days. It just announced its financial year end 2011 result. The financial result look good.
May i know what is Mudajaya technical outlook. What is Mudajya next resistance and intermediate downtrend?


Alex Lu said...

Hi chanhoo

Mudajaya's recent financial result is quite good. Everyone who tracks this stock wouldn't be surprised by that kind of results. I would assume that they have factored into their investment decision-making.

Technically speaking, the stock had tested its intermediate downtrend lien at RM3.05-3.10 last week. It is now trading below the RM3.00 which means that its immediate resistance will the RM3.00 mark & the immediate support will be at RM2.75.

chanhoo said...

Thanks Alex