Friday, February 18, 2011

CPO likely to drift lower

Since July 2010, CPO has been in an uptrend. That uptrend line accelerated when it broke above the horizontal line at RM2800. From a gradual uptrend line 1, CPO prices rallied into steeper & steeper uptrend lines (2, 3 & 4) until it became unsustainable & faltered in late December last year. Its subsequent rebound in January made a new rally high but on thin volume. This rebound has since ended and CPO is now testing the support of the uptrend line 3. With Parabolic SAR moving above CPO prices, a SELL signal has been generated. You may also notice that the MACD indicator is poised to hook down.


Chart: CPO's weeky chart as at Feb 17, 2011 (source: ifs.marketcenter.com)

Based on the negative technical outlook for CPO, we should reduce our position in the Plantation sector.
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7 comments:

  1. JYFriday, February 18, 2011 1:29:00 PM

    Hi Alex

    What do you think of Coastal? Up 6% today. Breakout?

    ReplyDelete
  2. ArsenalFriday, February 18, 2011 4:25:00 PM

    For MFlour, what is a reasonable PE to attach to it.

    ReplyDelete
  3. Alex LuMonday, February 21, 2011 3:13:00 PM

    Hi Arsenal

    For the kind of businesses that MFlour is involved in, a reasonable PE could be about 12-15 times. However, we have to be careful not to get into MFlour when its bottom-line turns south. That's why we must track its quarterly results closely.

    ReplyDelete
  4. Alex LuMonday, February 21, 2011 3:25:00 PM

    Hi JY


    Coastal had a upside breakout at RM2.55 on Friday. It may go to RM2.85 & then RM3.00.

    ReplyDelete
  5. Robin LeeFriday, February 25, 2011 8:41:00 PM

    Dear Alex,

    Is the Future trading price directly linked to the trading price of "real CPO"? If not, is there any authority that provides a reference for the price?

    Cheers,
    Robin.

    ReplyDelete
  6. Alex LuThursday, March 03, 2011 12:12:00 PM

    Hi Robin Lee

    Your question is whether future prices are connected to physical prices. There is a connection but the future prices take into account delivery in the near future, not immediate delivery. So, if you expect CPO supply to increase in 3 months time, the future prices for June delivery (3 months away) may be lower than now. This example may not be the real situation because I do not follow the fundamental of CPO, only the technical aspect.

    Technicians believe prices in the market have factored in all the 'knowns' as well as some of the 'unknowns' affecting a commodity or a security. We do not investigate but merely accept prices as given by the market. This may be one of the more significant weaknesses of technical analysis which can be exploited by those in the know.

    ReplyDelete
  7. Robin LeeTuesday, March 29, 2011 3:38:00 PM

    Hey Alex,

    Sorry for the late reply. So, the future trading has actually no relation to the actual trading of CPO? Or it serves as a guideline to CPO producing company to sell it to the market?

    I wonder if the future certificate can be used in exchange for real CPO.

    Thanks for clearing my doubt.

    ReplyDelete