Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional
Malaysian palm oil futures rose 3.07 percent for the week on Friday, with prices boosted by a combination of gains in comparative vegetable oils and expectations that dry weather may hurt production.
FCPO settled at 2886 compare last Friday at 2800 while volume decreased to 163,542 contracts compare last week at 214,190 contracts.
Open interests dropped to 177,092 contracts compare to last week at 178,066 contracts.
According to a trader in a foreign commodities brokerage, the market was very firm as it was supported by Chicago soybean oil futures and Dalian vegetable oil markets.
Meanwhile, weather is being focused where planters are worrying that should dry weather persists, the yields from fruit will be affected which eventually affect supply.
Traders and analysts at a key industry conference in Kuala Lumpur said this week that the next three weeks will be crucial for palm oil output.
According to Dorab Mistry, a world leading vegetable oil analyst and speaker, he believes in the event that an El Nino develops, crude palm oil futures will cling to 3,000 ringgit beyond June where production is likely to be affected from late 2014 onwards and price may reach 3,500.
However, he also added that should rains come as normal while the high-cycle kicks in from July onwards, prices may trade in a range between 2,900 and 2,600 ringgit from July until October.
Dorab Mistry also added the Indonesian mandate is truly a game changer and will keep palm oil prices relatively high for a long time where he referred to Indonesia’s move to raise the requirement for minimum bio content in diesel to 10 percent.
Despite the rise in demand for palm oil from the biofuel industry, major producers may see unfavourable weather hurting output where Dorab believed total world palm oil output will likely rise by only 3 million tonnes or even less in the year to September.
A Reuter’s survey of five traders and planters pegged Malaysian palm oil stocks at 1.79 million tonnes for February which is down 7.7 percent from a month ago while the country’s production of the tropical oil probably fell 13.1 percent from a month ago to 1.31 million tonnes in February as hot and dry weather hindered growth of fresh fruit bunches.
However, weak export demand may be reported for February as overseas sales of Malaysian palm products was seen at 1.32 million tonnes which is 3.6 percent lower than the 1.37 million tonnes shipped a month ago.
Technical View
From the chart, we drew two long trend support lines, as it broke our previous two support levels which we put previously at 2777 level while another one at 2720.
For this current support lines, we drew the green trend support line and yellow trend support line where green line is steeper and should be observed constantly while yellow trend support line will be the firmer one which indicate that price is still in a bull run for a longer period of time.
As price rising higher breaking resistance after resistance, we notice that price remain toppish at the 2,890 level on Friday due to lacklustre of trade.
Should price retraces, price may challenge and test the green trend support line.
Orange line: Moving Average Exponential 100 day.
Light Orange line: Moving Average Exponential 200 day.
For the coming week we pegged our important support levels at 2,870, 2,840 and 2,800-2777 Meanwhile, for our resistance levels, we pegged important ones at 2,900, 2,950 and 3,000.
Major fundamental news this coming week
MPOB – 10th March 2014 (Monday).
ITS & SGS Export reports – 10th March 2014 (Monday).
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my Disclaimer: This article is written for general information only. The writers, publishers and OPF will not be held liable for any damage or trading losses that result from the use of this article.