Plantation index to confirm CPO bullish breakout?

I have posted yesterday that CPO is poised to test its downtrend line at RM3050-3070. CPO had in fact closed at RM3120 yesterday, which means that CPO has now broken above the downtrend line.


Chart 1: CPO's weekly chart as at Nov 10, 2011 (courtesy of ifs.marketcenter.com)

With the bullish breakout for CPO, Plantation stocks are expected to slowly recover. If we look at the Plantation index, we can see two possible scenarios:

1) Plantation index is still in a downtrend line (R1-R1) with resistance at 7600. If it failed to break above this resistance- like what happened in May 2008- the index could drop back; or
2) Plantation index has been in a downtrend for the past 10 months, similar to the downtrend in 2008. The indicators are slowly turning positive. Example: MACD may be hooking up. RSI has broken above its downtrend line. +DMI looks set to rise up while -DMI looks set to go down. However, all these mildly positive indicators reading must culminate in a breakout for the Plantation index.

At the time of writing this post, Plantation index is at 7527- a whisker away from a test of the Plantation index downtrend line.


Chart 2: Plantation index's weekly chart as at Nov 11. 2011_3.00pm (Source: Quickcharts)

Based on the above, I would like to reiterate that we have a bullish breakout for CPO. If we can get a bullish breakout for Plantation index, we can expect an exciting few months for plantation stocks.