CPO- short-term weakness could be a buying opportunity

Last month, I had posted that CPO was testing its intermediate downtrend line at RM3050-3070. In fact, it later broke above that downtrend line and rallied to a high of RM3300. Since then, it had corrected back to RM3000- breaching the earlier downtrend line. The question to ask is whether CPO has broken its intermediate downtrend or not.

I have drawn two possible downtrend line for CPO. The earlier downtrend line is RR and the alternative downtrend kine is R1-R1. If we used downtrend line, RR, we can conclude that CPO has in fact achieved a bullish breakout- albeit the recent pullback that went marginally below the downtrend line. On the other hand, if we assume the downtrend line to be R1-R1, CPO is still in a downtrend. My preferred downtrend line is RR and as such, I believe CPO has broken above its intermediate downtrend. It is likely to go higher after a short correction.


Chart 1: CPO's weekly chart as at dec 29, 2011 (Source: iFS.marketcenter.com)

Looking at the daily chart below, we can see the short-term uptrend line for CPO is at RM3025-3030. After a good run last 2 weeks, I expect CPO to weaken & test the short-term uptrend line support over the next few days.


Chart 2: CPO's daily chart as at dec 29, 2011 (Source: iFS.marketcenter.com)

Based on the positive outlook for CPO for the medium-term, which is however buttressed by an expected weakness over the next few days, I think we can nibble into the plantation stocks in anticipation of a rally in CPO & plantation stocks in 1Q2012.