Tuesday, October 23, 2012
CPO- forming a base
CPO has rebounded after traded below RM2200. The major catalyst for a more positive outlook for CPO is the recent reduction in the export duties of CPO from the current 22-23% to 4.5-8.5% in January 2013 (for more, go here).
From the Chart 1, we can see that CPO is trading around RM2300-2400 for the past 2 weeks. Yesterday, it broke above that range & tested the RM2500 horizontal resistance. If CPO can successful breakout above the RM2500 mark, the current rebound can turn into a mini rally, sending CPO prices to first, close the gap at RM2700 (a resistance) and then, possibly test the strong horizontal resistance at RM2830 (also, look at Chart 2). I would consider the mini rally to be the optimistic scenario, while a successful breakout above RM2830 to be a low probability event. After all, CPO has broken the long-term uptrend line that stretched back to October 2008 (see Chart 3).
Chart 1: CPO's daily price as at Oct 22, 2012 (Source: iFSmarketcenter.com)
Chart 2: CPO's weekly price as at Oct 22, 2012 (Source: iFSmarketcenter.com)
Chart 3: CPO's weekly price as at Oct 22, 2012 (Source: iFSmarketcenter.com)
Based on the above, I would still maintain the negative outlook for CPO and the plantation sector.