Plantation stocks- good for a short-term trade?

Earlier, we have examined the close inverse correlation between USD & Commodities in general (represented by CRB) & Crude Oil in particular (represented by WTIC). Now let's look at the inverse correlation between USD & Agribusiness share price. To do so, we shall use the index for an agricultural ETF, Market Vectors Agribusiness (MOO). MOO tracks a global group of 40 company stocks that are in Agribusiness. I have presented a chart of USD vis-a-vis CRB & MOO (see Chart 1 below).

In the earlier post, we have noted that the CRB had failed to spike-up for a few days (i.e. Dec 11-17) when the USD was in a free fall. Notice how the MOO did not suffer the same fate. MOO has actually spiked up in the midst of a USD selldown.


Chart 1: The daily chart of USD vis-a-vis CRB & MOO as at Dec 22, 2008 (source: Stockcharts.com)

Now, we are going to take a quick look at CPO price movement over the past 4 months. CPO has been moving sideway for the past 2 months (since the end of October). We have not examined the correlation between USD & CPO, but offhand I believe that the same inverse correlation does apply.


Chart 2: CPO's daily chart as at Dec 22, 2008 (source: ifs.marketcenter.com)

From Chart 3, we will see the Plantation Index has broken above its medium-term downtrend line in early November & thereafter it was moving sideway (like CPO prices). On December 18, Plantation Index broke above its trading range, albeit on small volume. It was able to hold above the breakout level of 4000 for the next two days. Is this a genuine breakout or a fake rally due to year-end window dressing exercise? We have to wait & see.


Chart 3: Plantation's daily chart as at December 22, 2008 (source: Quickcharts)

From Chart 4 below, we can see that Plantation Index hit its immediate long-term uptrend line support at 3000 & it is now in the midst of a technical rebound.


Chart 4: Plantation's monthly chart as at December 22, 2008 (source: Quickcharts)

While I would like to see a more drawn-out bottoming phase for the Plantation Index & maybe a positive crossover in the monthly MACD before getting aggressive on this sector, I cannot discount the possibility of a strong rebound in the Plantation sector due to its recent sharp selldown. If one choose to take a constructive position in this sector-- with a view for short-term trading-- this could be a good time to do so. Good luck.