CPO1! trade ideas
Weekend Updates – 4 Oct 2020 | CPO, Soybean, Soybean Oil & FXWeekend Market Updates & Analysis 4 Oct 2020
What Happened
1) FCPO opened higher Monday and then traded lower by Friday, closing near the low of the week.
Recap from last Weekend’s update.
You can read last week’s update here: Weekend Updates – 27 Sept 2020 | CPO, Soybean, Soybean Oil & Currencies
2) On Point: 58, 59, 60: In my last update, I have said that the odds favor a second leg down before we see a retest of the highs. So far we have the second leg down. Will it continue lower? We will look at these questions below.
On Soybean
3) On Point 26, I said that the bear inside bar closed at the lows, but followed a tight bull micro-channel. Sellers will try to push below the low, but will likely find more buyers below.
i. Prices did push below the low of the previous week, and did indeed find more buyers below, and reversed sharply on Wednesday (believed to be due to lower than expected Soybean stock report) and closed the week as a bull bar with a tail above.
On Soybean Oil
4) On Point 37, I said the bears are looking for a second leg down after a brief bounce and chances are they will likely get it in the next 1-2 weeks.
i. Market held steady for the first 3 days and sold off into the weekend for the second leg down to close the week as a bear bar closing at its low.
On Dollar Index – DXY
5) On Point 53, 55, I said that prices was trading at a trend line resistance at 94.50, and that we may see price pullback before deciding if it there will be another push up to test resistance.
i. So far we have the pullback to support at 93.50
ii. Market is still deciding if this support will hold, and if we will get the 3rd leg bounce up. We should find out by next week.
What’s up ahead?
Soybean Monthly
6) Soybean monthly closed back as a bull bar with a moderate tail above. Price is just within a touch of the multi year trading highs around 1080-1100 level.
i. This makes Sept bull bar as a buy signal bar for the bulls, and we will likely see an attempt to break above the highs of Sept.
ii. Should the bulls get it, we would then ask if the price can continue up to the top of the trading range around 1080-1100, and if prices can break strongly above it.
7) These areas tends to be magnet and target for the bulls. Will prices get there? Here are some of the things we need to look at:
i. China is now on holiday, and will be back to the markets on the 9th which is Friday of next week. Will they continue to buy more Soybeans?
ii. I think if we see a weakening of USD moving forward, I do not see why not because China still have a trade deal to fulfill and they would want to be seen as a credible trading partner holding up to their part of the Phase One trade deal in the eyes of the International community, .
iii. Also, should the stock levels for Soybean and production continues to decline, these are supportive for the market too.
iv. So we will need to monitor these accordingly.
Soybean Weekly
8) Soybean found more buyers after a failed break below last week’s low. This week closed as a bull bar but with a prominent tail above and below.
i. This is poor follow through from the bears and this is a positive point for the bulls. A consecutive bear bar would have made the bear’s case slightly stronger, but they were not able to create it. This week’s bar is a slightly weaker buy signal bar for next week due to the tail above.
9) So essentially, price has been trading sideways for the last 3 weeks between 985 to 1046 with this bounce.
i. Is price forming a potential Final Bull Flag?
ii. There is a potential for this, especially after an extensive run up, price is trading just below the multi year trading range highs and resistance around 1080.
iii. If this is true, it means that price may continue to consolidate here for a bit more, and then have at least another leg up into the top of the trading range attempting to break above the trading range and make new highs.
10) Can price trade down from here? Let’s look at the Daily Chart.
Daily Soybean
11) Soybean tested the support levels that we highlighted last week around 988 which is the 20ema on the Daily Chart.
12) The support held, and price has bounce to trade near the recent highs currently. Can price trade higher from here?
13) So far these are my thoughts:
i. The USD is generally strengthening in the last few weeks, “theoretically”, we should be seeing a lower Soybean price like Soybean Oil. The fact that prices is back trading near the recent highs is telling me the relative strength of Soybeans is there and is bucking the general market trends.
ii. We still need to see what Soybean does from here, but currently from its relative strength, I would favor slightly higher prices.
Soybean Oil Monthly
14) The monthly Sept soybean oil chart closed below the middle the bar, has a small bull body, has a large prominent tail above, and a noticeable tail below.
15) In my last update on Point 33, I said that “Should the bears fail to create a strong bear close for the month, but price still close below the middle of the month, it is still a sell signal bar for Oct, but a weaker one and we may find more buyers than sellers below Sept lows at support areas” primarily because this is the first pullback following a 5 month bull micro channel. Support areas that I am looking at is the 31, and 29 area.
16) On Point 37, I also said that the bears are looking for a second leg down and they are likely to get it in the next 1-2 weeks. So far the bears have managed to push below the lows of Sept, and currently the bar is a bear bar.
i. But because it is still very early in the month, by the end of the month, the bar can look very different that what it is now.
17) I have also said due to the 4-5 bull micro channel on the monthly chart, we will likely find more buyers below at support areas, because the bulls are likely to buy the 1-3 month pullback.
i. So I will be monitoring the 31 to 29 level as support areas for Soybean Oil.
Soybean Oil Weekly
18) In my update last week on Point 37 i, I said that the bears would be looking for a second leg down and they are likely to get it in the next 1-2 weeks
19) On Point 38, I said that “After the pullback is completed, we should see the attempt to rest the recent highs and if the re-test is weak and choppy, and stalls before reaching the highs, traders will conclude that the trend is over and prices will reverse at a lower high or at some sort of double top.”
i. This view still remain the same.
20) I will be monitoring if the levels 31 holds as a support, and if not, probably around the level 30-29.
Daily Soybean Oil
20) So far we are looking at the second leg down for Soybean Oil.
21) My views this week remains the same as last week and as I have summarized in point 19 above.
22) I will be monitoring if prices test the support levels between 31 to 29 and whether these support areas can hold for the re-test of the highs to happen.
Dalian Palm Olein (Monthly, Weekly, Daily)
23) I will not be updating on the Dalian Palm Olein market as China is still in a trading holiday until the 8th and their market will open on Friday of next week.
FCPO Monthly
24) In my update last week, I said that the bears would want to close the monthly bar near the lows, which makes at least slightly lower prices likely this week.
i. The bears manage to get that by Wednesday, and prices bounce slightly in the new month bar and then traded below Sept lows on Friday.
25) Last week I talk about the bears are likely to get their second leg down, and that the areas of 2800 and 2650-00 would be the support areas I will be looking at to see if it holds so that prices can create the attempted re-test higher.
26) The monthly bar has just started and is currently a bear bar. The bar could look very different by the end of the month.
Weekly FCPO
27) Last week I said we may potentially get an inside bar, which means prices trade at a small range – this is a common pattern following an inside-outside bar.
28) But I also said that the bears are looking for a second leg down, which they will likely get as the odds favor that, and thereafter, to monitor 2800 and 2650-00 areas as support areas as I suspect there will be more buyers than sellers below due to the strong trend up since May.
29) So far the bears are getting their second leg down. Price closed the week at 2708, and it is a bear bar, which makes slightly lower price next week a possibility.
30) I will be monitoring if we see strong profit taking from the shorts at the support areas that I have highlighted, and if the support areas hold, to see an attempt to re-test the recent highs.
i. We also have to monitor prices against other factors such as how Soybean, Soybean Oil, and the currencies are doing to make an assessment on how prices will behave moving forward.
Daily FCPO
31) On the daily chart, we can see prices resuming the second leg down, but the strength of the second leg is not as strong as the first leg as we can see the overlapping bars and choppy trade.
32) Price is still in the process to complete the second leg down and I will be monitoring the 2800-2650-00 areas and see if prices holds there.
i. Once the second leg is completed, I do expect to see an attempt to re-test the recent highs.
ii. The manner of the attempt (bounce) will tell us a lot about prices moving forward.
iii. A strong re-test of the highs with very strong buying pressure indicates that prices will attempt higher prices and try to break out of the 3150-3200 level, while;
iv. A weak re-test of the highs with weak buying pressure likely indicate that the bull move and test of the multi-year trading highs has ended and the re-test will likely be a lower high where bears sell the bear rally.
33) Take note that we have to look at the above together with these factors below also:
i. How is the Production in Oct? Rising? Decreasing?
ii. Is the expected rainy season happening causing massive flood and harvest disruption?
iii. Is the Covid situation in Malaysia worsening, and causing new strict Movement Control Order where businesses are not allowed to open again? (This will hurt confidence and demand)
iv. How is the USD as measured by the Dollar Index trading? A strengthening Dollar is bad for Palm, SB, SBO.
v. How is the Chinese Yuan and Indian Rupee trading in relations to the USD? (we will look at these below)
USD/Chinese Yuan
34) The USD has been steadily weakening against the RMB/Chinese Yuan since May. We saw the USD strengthened slightly last week, but this week, traded slightly lower again against the RMB.
35) As we have seen in the Dollar Index, the USD is attempting a bounce, but so far have just managed a 2 legged bounce and currently is in the pullback of the second leg. Should the USD create a weak bounce and then continue to weaken, that would be bullish for the RMB, which is bullish for Soybean/Soybean Oil, which is bullish for Palm.
36) So far from the USD/CNY chart above, the USD is weakening steadily in a tight bear micro channel – but prices is now sideways in the last 3 weeks, which indicates a small trading range around 6.8300 to 6.7500 area.
37) Can the RMB continue to strengthen against the USD? Looking at the tight bear channel, it certainly looks likely. At the very least, this sideways consolidation could be building at least as a Final Bear Flag, which means at least slightly lower prices are likely.
38) So we have to monitor this closely as a stronger RMB against the USD is good for commodities (Soybean/Soybean Oil) which is also good for Palm.
Indian Rupee/USD
39) I would also be looking at the Indian Rupee(INR) versus the USD. I believe logically that a stronger Indian Rupee against the dollar is favorable to Palm prices.
40) Why? Because all palm exports are traded based on USD, and with that view in mind, a stronger INR will be favorable to Palm exports because you can get more USD with less INR.
i. Alternatively, think of it this way: Can you imagine a situation where we have a weakening INR vs UDS (Cost more Rupee to buy USD, and then, a stronger MYR vs USD (Cost more USD to buy MYR?). Bad + Bad. Can’t be good.
41) So far there was a weakening of the INR vs USD in the month of Sept, but currently we are looking at the INR ticking higher last week and closed as a bull bar, but with a tail above. I think we should see slightly stronger INR in the next 1-2 weeks.
Dollar Index – DXY
42) So far, the Dollar Index has had a 2 legged bounce to the bear trend line, and last week pulled back to the 20ema on the daily chart which is support. There is also a lower trend line below as support around the areas of 93.50.
43) Currently, markets are watching if we will get a prominent 3rd leg up to test around the 95-96 area – a wedge push up or better.
i. Why I say prominent – because sometimes, the 3rd leg up can be very inconspicuous and may just be a 1 bar up, and reverse down.
ii. In this case, then the market will likely conclude that this bounce from Sept is likely just a bear rally, and will sell the bounce for a 3rd leg down to to test 92 area (recent lows) and then 88-90 area as I have discussed in my previous 2 reports.
44) So I think the next 1-2 weeks are crucial to monitor the movements of DXY. A stronger dollar is bad for commodities prices namely Soybean/Soybean Oil/ Palm and vice versa.
45) Personally, I think we are going to see slightly higher prices in DXY to around 95-96 in the next 1-2 weeks (which is temporary not good for commodities), and I will be looking at the buying pressure of the bounce. A weak 3rd leg up indicate that it is just a wedge bear rally and we will likely see a weaker dollar in the near future.
i. I will be monitoring the Dollar as per the above accordingly.
Summary
46) We have covered a lot of grounds and these will be what I will be looking at:
i. Soybean traded back near the highs. – is price consolidating sideways, and preparing for another move up? Or is price trading lower next week? First is good for the bulls, while the second is good for the bears.
ii. Soybean oil to complete its second leg down, and to monitor if 31-29 area holds as support – and if support holds, to monitor the strength of the bounce from there. A strong bounce = good for the bulls while a weak bounce is good for the bears.
iii. FCPO is currently also forming its second leg down. I will be monitoring if the areas between 2800-2650-00 area holds as support for prices, and if yes, to monitor the strength of the bounce from there. A strong bounce = good for the bulls while a weak bounce is good for the bears.
iv. Generally I can see the RMB and the INR is strengthening against the USD. I would like to see this continue which is favorable to the bulls, or at least sideways. A significant weakening of RMB and INR against the USD I think will definitely not be a good factor for SB/SBO/Palm.
v. I think the Dollar is trying to find support around the areas of 93-93.50, and if the dollar finds support and bounces in the next 1-2 weeks to 95-96, this will not be favorable for commodities prices at least temporarily. I will also be monitoring for an inconspicuous 3rd leg up – maybe a 1-2 bar up, then reverse down. If this happens, I think the market will believe this recent bounce is just a wedge rally and sell it.
47) As I have highlighted last week in Point 63 of last week’s report, is it possible where we see the Dollar Index strengthen but Palm prices still holds and not drop much?
Answer is yes, its possible. Why?
i. What if production levels drops off significantly? This is good for bulls.
ii. What if it starts to rain at any moment, we see severe flooding in ffb production states and disrupts harvest? This is good for bulls.
iii. What if exports figures are good? This is good for bulls.
iv. What if the Dollar index strengthen against other currencies, but remains weak against RMB and INR? This is also good for SB/SBO/Palm.
iv. So a strengthening Dollar Index does not necessarily equals lower Palm Prices. We need to see it in relation to the RMB, INR, local productions, demand and related factors.
48) So for next week, things are status quo as per last week’s update. I will be monitoring:
i. How strong the current leg down in FCPO is (not very strong currently);
ii. Whether the areas of 2800-2650-00 area holds for a re-test higher;
iii. and if we get the re-test higher, how strong is the re-test? Strong = good for bulls.
iv. At the same time, to monitor if we have a a weakening or strengthening Dollar against CNY & INR.
49) Can prices continue to drop off to say, 2400 non-stop?
i. While there is always such a possibility, currently I would say the probability of this happening is lower than prices having at least a small sideways to up re-test of the highs after holding at support.
ii. The reason for this view is that we can see Soybean currently traded back to near its highs; and
iii. We do not have a firm strengthening of the Dollar – Its just a bounce at this point.
iv. Unless Soybean suddenly sells off aggressively, then I would start to be worried about Palm too.
Other Black Swan Factors To Watch
50) i. Covid cases is ticking up in Malaysia. If we get another strict Movement Control Order, it might hurt confidence and consumption.
ii. The leader of the freeworld is sticken with Covid. He should get the best medical care in the world. But (*touch wood) in case he kicks the bucket, this will likely cause a shock to the world markets and we may see big movements in all instruments such as commodities and equities (big gap down likely).
iii. Even if he doesn’t kick the bucket, he might emerge from this sickness being more resolute to fight the disease he has been writing off until recently, and we may see potentially drastic action from him (though unlikely – just something to watch out for)
What Did I miss out?
51) I also want to touch a bit on Crude Oil.
52) Crude is currently forming the second leg down – which looks like just like a technical correction since the big sell of in April.
53) Preferably, I would like to see Crude start ticking higher after testing support around 36 – 34 area. Lower crude price is generally not so favarable to commodities prices because it can indicate:
i. General world demand and thus economy not doing very well. Why? A strong world economy with strong consumption of energy for economic production, automobiles and flying should cause higher crude prices.
ii. So if crude continues to trade lower and lower, that does that tell you?
iii. Well it tells us that demand is not as strong.
i.e. Less airplanes flying, people driving less due to lockdowns, industries buying less energy for their production usage while output for crude oil can be expanded at any time (Opec and other producing countries are already cutting down their production which can be increased at any time).
So I will be keeping an eye out for Crude as well as a general barometer for world economic health. If we see more and more countries resort to strict lockdown globally as we enter the colder seasons and potentially 2nd and 3rd wave of Covid cases, this will be negative for Crude, and hence, general sentiments and confidence.
I think that’s it for now. It is likely that there will not be an update from me next weekend as I will be away for a personal matter. So unless there are big changes to my analysis this week, I may publish a short quick update on the major changes. Otherwise, expect no updates from me next week.
Wishing you well, trade safe, and as always, if you have any feedback, do get in touch with me.
Thanks for reading.
Best Regards,
Tech Trader
FCPO TRADING : 187) short on reboundthis is haidojo and the number is 187...
analysis maintains "short on rebound"...
that is nothing much to comment except that the market fcpo-dec is sliding down slowly...
onli today we look at it at lower timeframe...
next support at 2600...resistance at 2800...
higher resistance : 2900
immediate resistance : 2800
psychological support : 2700
lower support : 2600
WARNING!
RISK DISCLAIMER : this is juz a trading idea...trading stocks, futures or forex might incur a huge risk to your account/funds… DON’T LOSE MONEY THAT YOU CANNOT AFFORD …any idea(s) of trading in this episode SHALL NOT be regarded as a hint of BUYING or SELLING. It is MERELY a trading journal and it has been used for educational purpose only… trade at your own risk!
**your "LIKE" and "FOLLOW" are my main source of motivation to continue posting more valuable contents...TQ
CPO futures likely on bearish tone next week..BewareThe crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to stay in a bearish tone as market sentiment continues to decline amid rising number of COVID-19 cases.
Estimate of pullback point is between 2692 - 2712..and if it fails to jump up again at 2683, most likely it will continue to fall up ..
Be careful with the movement and always take care of your risk..
.
.
On a Friday-to-Friday basis, the CPO futures contract for October 2020 declined RM84 to RM2,846 per tonne, November 2020 retreated RM106 to RM2,766 per tonne, December 2020 narrowed RM114 to RM2,708 per tonne, and January 2021 was RM118 lower at RM2,674 per tonne
.
.
Weekly volume slipped to 318,816 lots from 347,001 lots in the previous week, while open interest declined to 245,116 contracts from 253,795 contracts a week earlier
On the physical market, October South stood at RM2,880 per tonne.
.
.
.
If you like this analysis, please make sure to like the post!
I would also appreciate it if you could leave a comment below with some original insight.
FCPO TRADING : 186) short on reboundthis is haidojo and the number is 186...
analysis maintains "short on rebound"...
that is nothing much to comment except that the market fcpo-dec is sliding down slowly...
a gap down go down scenario...
next support at 2600...resistance at 2800...
higher resistance : 2900
immediate resistance : 2800
psychological support : 2700
lower support : 2600
WARNING!
RISK DISCLAIMER : this is juz a trading idea...trading stocks, futures or forex might incur a huge risk to your account/funds… DON’T LOSE MONEY THAT YOU CANNOT AFFORD …any idea(s) of trading in this episode SHALL NOT be regarded as a hint of BUYING or SELLING. It is MERELY a trading journal and it has been used for educational purpose only… trade at your own risk!
**your "LIKE" and "FOLLOW" are my main source of motivation to continue posting more valuable contents...TQ**
FCPO LongCalculate your risk for Long position. Price at support trendline but consider other factors.
Week 40: Compression is coming on FCPOX 2020Week 40: 28 September to 02 October 2020
FCPOX 2020 analysis
At the moment the price is in the consolidation zone, to make it simple to the naked eye, the price is forming the Right Shoulder.
However, please note that there are many variations of the "right shoulder", it can be a straight horizontal channel, diagonal channel, flag, wedge, and ascending triangle.
Therefore, there are many variations that we can play with the market. As this is a weekly analysis, I will choose the smallest risk with a much favourable risk rewards ratio.
Here is my personal trade:
Sell Limit at RM2,978
Stop Loss at RM3,027
Take Profit at RM2,695
Risk Rewards Ratio = 5.9R
Disclaimer :
The analysis above for educational purposes only, I do not responsible for your losses. Please adjust your own lot-sizing according to your appetite.
If you are benefiting from my trade opinion, please buy me coffee.
As always, move your SL when you are in the profit zone.
FCPO TRADING : 183) short on reboundthis is haidojo and the number is 183...
analysis maintains "short on rebound"...
that is nothing much to comment except that the market fcpo-dec is sliding down slowly...
lower-high is formed...unless the price challenges 2900 and maintains abv it, then we might be looking at a possible reversal...
higher resistance : 2900
immediate resistance : 2800
temporary support : 2730
psychological support : 2700
WARNING!
RISK DISCLAIMER : this is juz a trading idea...trading stocks, futures or forex might incur a huge risk to your account/funds… DON’T LOSE MONEY THAT YOU CANNOT AFFORD …any idea(s) of trading in this episode SHALL NOT be regarded as a hint of BUYING or SELLING . It is MERELY a trading journal and it has been used for educational purpose only… trade at your own risk!
**your "LIKE" and "FOLLOW" are my main source of motivation to continue posting more valuable contents...TQ**
Oct01 - CPO (Hourly) - Potential test 26xx if 2700 Fails...We're dealing with a MAJOR SIDEWAYS situation here, seeing the steep Up & Down swings & abrupt reversals between 2.6,2.8k --- 3.0,3.1k.
2.6-2.8k is KEY SUPPORT area on Weekly, price likely to consolidate within this zone, before deciding its next major direction.
Long-term view, currently favoring UP, as long as S2 holds.
Happy Hunting! 🥂🚀
-jk-
FCPO TRADING : 182) bat pattern invalidthis is haidojo and the number is 182...
so the price has fallen below the A-leg of bearish bat pattern...it becomes invalid...
so short on rebound...
higher resistance : 2900
immediate resistance : 2800
psychological level : 2700
lower support : 2600
WARNING!
RISK DISCLAIMER : this is juz a trading idea...trading stocks, futures or forex might incur a huge risk to your account/funds… DON’T LOSE MONEY THAT YOU CANNOT AFFORD …any idea(s) of trading in this episode SHALL NOT be regarded as a hint of BUYING or SELLING . It is MERELY a trading journal and it has been used for educational purpose only… trade at your own risk!
**your "LIKE" and "FOLLOW" are my main source of motivation to continue posting more valuable contents...TQ**
HEAD AND SHOULDER + RSI below 50, bear is taking charge soon?fcpo is trying to surpass above RSI 50 but failed to do so. very high possibility that the uptrend ends.
Also, HEAD AND SHOULDER could be formed after the price break the neckline (at around 2774)..
so is the bear taking charge soon?
FCPO TRADING : 181) bearish bat patternthis is haidojo and the number is 181...
"bearish bat pattern - short at 2947, SL 2983, 1st tp 2900, 2nd tp 2800..."
things don't seem good on our bearish bat pattern...price continues to slide lower...so the strategy is : "short on rebound"...
higher resistance : 2900
immediate resistance : 2800
psychological level : 2700
lower support : 2600
WARNING!
RISK DISCLAIMER : this is juz a trading idea...trading stocks, futures or forex might incur a huge risk to your account/funds… DON’T LOSE MONEY THAT YOU CANNOT AFFORD… any idea(s) of trading in this episode SHALL NOT be regarded as a hint of BUYING or SELLING . It is MERELY a trading journal and it has been used for educational purpose only… trade at your own risk!
**your "LIKE" and "FOLLOW" are my main source of motivation to continue posting more valuable contents...TQ**
FCPO TRADING : 180) possible bearish bat patternthis is haidojo and the number is 180...
a possible bearish bat pattern is formed today...
short at 2947, SL 2983, 1st tp 2900, 2nd tp 2800...
higher resistance : 2900
immediate resistance : 2800
psychological level : 2700
lower support : 2600
WARNING!
RISK DISCLAIMER : this is juz a trading idea...trading stocks, futures or forex might incur a huge risk to your account/funds… DON’T LOSE MONEY THAT YOU CANNOT AFFORD …any idea(s) of trading in this episode SHALL NOT be regarded as a hint of BUYING or SELLING . It is MERELY a trading journal and it has been used for educational purpose only… trade at your own risk!
**your "LIKE" and "FOLLOW" are my main source of motivation to continue posting more valuable contents...TQ**
FCPO..RSI SUPPORTED..During the last downtrend (Jan- May 20), RSI never surpass above 50 and hence RSI 50 become the resistance.
Similarly, RSI 50 was became the support for the recent bull trend (May 20- current)..
will RSI still continue to support the BULL?
FCPO | Weekend Updates & Analysis – 27 Sept 2020Weekend Market Updates & Analysis 27 Sept 2020
Where we are
1) The market opened higher on the 21st, and started to sell off in the afternoon throughout the whole week, and had a short covering outside up bar on Friday on some short profit taking.
2) When I was writing the last market report, prices was still very bullish and there was no indication of any strong pull back yet.
3) However, I did voice my caution with the following points in my last update. I have stated:
i. That prices for FCPO, SBO and Dalian are all testing their multiyear top of the trading range.
ii. Point 14: FCPO is in the 3rd push up of the wedge which tends to attract profit takers
iii. Point 23: Soybean’s move up is climatic and usually not sustainable
iv. Point 25, 27, 28 : Soybean Oil chart is climactic and tends to attract profit takers at the top of the trading range.
v. Point 32: Dalian Palm Olein is testing the top of the 7 year trading range, and is a wedge which tends to attract profit takers especially if we have a strengthening of the USD vs RMB.
vi. Point 53: A strengthening of the USD against RMB will damper the rally in SB/SBO
vii.Point 56: Usually after a big rally where we have a wedge pattern, and price is at a major resistance areas, we tend to see some profit.
You can read last week’s update in detail here. Weekend Market Updates & Analysis 20 Sept 2020 | CPO, Soybean, Soybean Oil & Some Currencies
My opinion of what caused the pullback
4) Note that USD started to strengthen sharply around 3pm Malaysian time, which is the open of the European market on the 21st of Sept 2020.
5) With that, a lot of markets started to sell off across the board. SBO/BO, Gold/Silver, Corn, Wheat, European Equities, China Equities, Indian Equities, Taiwan Equities, Australian Equities, USA Pre-market Futures, basically most of what instrument that has benefited from a weak dollar and had been rallying prior to that sold off.
6) As for Palm/SBO/SB, I have said that due to the continuous rally for months, there are bulls who have been long since May and are looking for reasons to book their profits.
i.With the strengthening of the Dollar and the global equities and commodities unwinding, it gave bulls a good reason to book their profits and close their position, which caused a strong pullback.
ii. As with most climatic push up that is excessive and sharp, once the selling started, selling begets more selling, and we saw 4 continuous days of selling (Monday to Thursday) and a bounce on Friday.
What’s Next?
Monthly FCPO
7) In my last update, I said that the monthly chart was in a strong bull bar, and was unlikely to turn into a bear bar.
8) However, the unlikely thing has happened and with 3 more trading days to go next week, if the bar close below the middle of the bar or near the lows, it is a bearish bar and a sell entry bar for sellers.
9) So we have to see how the bar closes next week, whether bulls can push price back higher and close above the middle of the bar, or bears can maintain prices below the middle of the bar, and close as low as possible to the low of the month.
Weekly FCPO
10) Price reversed down from the top of the multiyear trading range and closed the week as an outside down bear bar.
11) Price found some support at the lower trend line and reversed some of the down move on Friday so the week has a prominent tail below.
12) The bears would have preferred a strong close at the low of the week. A tail below shows the lack of conviction of the bears. The bear bar is a sell signal bar for next week albeit a weaker one especially near support.
13) With last week being an inside bar to this week’s outside down bar, it is possible that next week we might get another inside bar, which mean price trade in a smaller range but still within this week’s high and lows.
14) We will have to monitor if the bears get a breakout below this week’s low during next’s week price action. Since the previous trend up from the end of April is fairly strong, I suspect we should see more buyers below than sellers after the second attempt to go sideways to lower.
i. Other potential support areas below is at 2800 and at the 20ema on the weekly chart at around 2650-00 area.
Daily FCPO
15) Price reverse down strongly from the top of the trading range, and found support at the bottom of the trend line just below the 20ema.
16) Friday closed as an outside up bull bar, also an inside-outside bar with Thursday’s bear bar, and taken together, Thursday and Friday was a Down-Up reversal at the 4 month’s Trend line.
17) Bull are looking for a continuation of the bull trend following this sharp pullback. Will they get it? It will depend on a few other factors which we will look into throughout this report.
i. The bears on the other hand are looking for a second leg sideways to down after a brief bounce and for price to test around 2650-00 area.
18) This current strong pullback from the bull trend tells us that the bulls are very willing to sell at these 3100-3000 top of the multiyear trading range, and sellers are also looking to sell at these areas.
19) Usually following a strong uptrend, markets prefer to see some type of a double top before we see a proper reversal of the trend. This means that traders will be looking to see if we have a strong re-test of the recent highs of 3100 after some kind of sideways to down second leg test.
i. If we have a strong re-test of the high, traders will then see if we get another breakout to a new high and for the trend to continue.
ii. If we have a weak re-test of the highs, traders will conclude that the trend has likely ended and will be looking to sell some type of double top with the recent highs. Take note that a double top does not need to be exactly at 3100. It can higher, or lower and still be considered a double top.
Some fundamental issues effecting palm
20) i. Production is expected to be lower next month between the range of 3-8%.
ii. Expectation of more rain to hit this region which may cause flooding and may cause harvest disruption.
iii) China will be on holiday for the first 8 days of Oct. I’m still wondering the effect this will have on palm as I cannot say for sure.
iv) Some talk of labor shortage in the plantations.
Monthly Soybean
21) Soybean monthly pulled back near the high of the multiyear trading range. Currently, the bar has a prominent tail above which indicates some profit taking by the bulls and some selling from the bears but still trading slightly above the middle of the bar, which is to the bull’s favor.
22) There are 3 more trading days for Sept, and the bears wants the month to close below the middle of the bar, while the bulls want prices to bounce to close above the middle of the bar, as high as possible.
23) However, even if the bulls get a bounce in the next few days and prices close above the middle of the bar or near the high of the month, price is currently trading near the top of the multiyear trading range, and the bulls have been long since May/June and if price stalls at the top of the trading range, we will likely see more profit taking from the bulls and the bears coming out to sell.
i. We need to monitor this in conjuction with the Dollar’s move also as I will explain more below.
Soybean Weekly
24) Soybean weekly closed as a bear inside bar. This is the first bear bar following a tight 6 bull micro channel which indicated very strong buying prior to this pullback. Take note that the bears was not able to close the weekly bar below the low of last week, which indicated the bears are not as strong as they would have preferred.
26) Because it is a bear bar closing near it’s low, it is a bear signal bar for next week. So bear will likely try to push prices below the low of this week. However, because this is the first bear bar following a tight bull microchannel, we will likely find more buyers than sellers below the bar.
i. I will be monitoring the levels 988 and 940 area as support levels.
Daily Soybean
27) This is the first major pullback for Soybean on the daily chart since the first week of August. It was in a 1.5 months of climactic bull parabolic wedge test of the top of the multiyear trading range and prices is currently pulling back to its 20ema around 990.
28) Because the upmove was so strong, we should expect traders to buy this pullback once it is over. Support areas that I am looking at is around 988 and 940 area.
i. Take note that the bears are looking for a second leg down from here after a brief bounce, and will likely get it next week.
29) Usually for trend to reverse, it has to have some kind of major trend reversal pattern, meaning prices would have to have some kind of re-rest of the highs and make some type of double top. So traders will be looking at the strength of the re-test of the highs after this pullback is over.
30) If the re-test of the highs is strong, bulls want prices to breakout of the top of the multi year trading range. However, we also have to look at how the USD is trading in relation to SB. If the Dollar continues to strengthen, then price may stall again and turn down lower. If instead we see the Dollar turn down lower, then it will be supportive for SB prices and traders will look to see if price can break above the top of the multi year trading range.
Monthly Soybean Oil
31) Monthly SBO turned down lower near the high of the multiyear trading range. The monthly bar currently is a doji bar. With 3 trading days left in the month, the bears wants the bar to close near the low below the open so that the month will have a bear body with a big tail above, which is a reversal bar and a signal bar for lower prices in Oct.
32) The bulls on the other hand wants prices to reverse up in the next 3 trading day so that it can close back above the middle of the bar so that it would not be too bearish for Oct.
33) Should the bears fail to create a strong bear close for the month, but price still close below the middle of the month, it is still a sell signal bar for Oct, but a weak one, especially because prices followed a 4 bull micro channel since May and we may find more buyers than sellers below Sept lows at suport areas.
i. I will be looking at around 31 and 29 area as support levels.
Weekly Soybean Oil
34) Soybean Weekly closed as a big bear bar, but with a prominent tail below. This is the first major bear bar since the end of April, which is the first time since then that the bears was able to create any significant selling pressure.
35) However, this bear bar came following a tight bull channel which lasted 4+ months. So we are likely to see more buyers than sellers below the low of thus bear bar at support levels.
36) As I have written previously, unless prices went up in a climactic fashion too excessingly which will cause a very strong reversal, prices usually has to go sideways into a trading range before it will create a proper reversal.
37) This means that we will likely see an attempt to re-test the highs made in in Sept moving forward after this pullback is over. Traders will be looking at the strength of the re-test, whether the buying pressure is strong, or weak and choppy.
i. Take note that the bears are looking for a second leg down after a brief bounce and chances are they will likely get it in the next 1-2 weeks.
38) After the pullback is completed, if the re-test is weak and choppy, and stalls before reaching the highs, traders will conclude that the trend is over and prices will reverse at a lower high or at some sort of double top.
39) It is also important to monitor where the Dollar is trading moving forward. A weaker Dollar will be supportive for SBO prices while a stronger Dollar will likely bring out the bears and cause the bulls to book their profits.
Monthly Dalian Palm Olein
40) So far the monthly chart for palm olein reversed down and is trading close to the lower end of the month’s range with a prominent tail above. Prices reversed lower near the top of the multiyear trading range as the Dollar strengthened.
41) With 3 more trading days to go, and the market closing for the first 8 days of Oct, I will skip this chart until the market reopens again.
Weekly Dalian Palm Olein
41) The weekly bar closed as a bear bar, the first major bear bar near the top of the multi year trading range.
42) Since this market will be closing for the first 8 days of Oct, I will skip this chart until the market reopens again.
Daily Dalian Palm Olein
43) Prices sold off neat the top of the multiyear trading range following a wedge 3 push up pattern.
44) Since this market will be closing for the first 8 days of Oct, I will skip this chart until the market reopens again.
Monthly Dollar Index – DXY
45) Currently, the monthly bar for the Dollar is a strong bull bar after a failed breakout below the low of Aug.
46) With another 3 trading days to go, the bulls wants to maintain a strong close where prices close near the high of the months. The bears on the other hand wants the opposite and wants prices to close to the middle or at least below the middle of the month so that they can reduce some of the bullishness.
47) Should the bulls get that they want and prices close near the high of the month, we should see at least slightly higher prices next month. There is a resistance magnet above at 95.00 which is the weekly 20ema and price may test there first before deciding if it will continue higher or reverse back lower.
48) A stronger dollar is bearish for SB/SBO/Palm which a weaker dollar is supportive for the grains and palm.
Weekly Dollar Index – DXY
49) Price closed as a big bull bar on the weekly dollar chart so we should see slight higher prices next week. Price is currently heading towards the 95.00 level which is the 20ema and that price is a magnet and target for the bulls. We may not see any significant selling until we reach there.
50) We are currently in the second leg of the bull bounce which is what most traders expect. Sometimes prices can extend to a 3rd leg, which means we may see a brief pullback in the next 1 weeks, and then a resumption up to try to break above the 95-96 area.
i. And should price fail to break strongly above the 95-96 area after the 3rd leg up, traders will assume that the bounce is just a 2 legged or a wedge bounce and sell the lower high.
51) In my last update, I have said that the Dollar looks like it is still in its second led down since March, which means we may see another leg down to test the recent low areas of 92-93 levels first, and if manage to break it, then 89-90 in the weeks/months ahead.
52) We need to follow the development of the Dollar closely as SB/SBO/Palm is currently trading inversely to the Dollar. A weaker Dollar is supportive for prices of commodities such as SB/SBO/Palm and vice versa.
Daily Dollar Index – DXY
53) On the daily chart, the Dollar is in a 6 bar tight bull channel which is signs of strong buying. This means that should we see a brief pullback next week, there should be more buyers than sellers and they will buy that first pullback. We should see slightly higher prices as traders will buy the pullback for a 3rd leg up.
54) However, do note that there is a magnet and resistance above for the Dollar around 95-96 area. Should price test that area, and stalls, traders will assume this 3 legged wedge bounce is just a bear rally, and will sell the bounce for a 3rd leg down to test 92-93 level, then 89-90 level in the weeks ahead.
55) Also note that the current price at 94.50 is at the bear trend line (not drawn) and if price can’t break above this trend line, traders will assume that this is just a bear rally, and will sell the Dollar for another leg down to retest support areas.
56) So we need to follow closely how the Dollar is developing moving forward as a weaker Dollar is supportive for prices of commodities such as SB/SBO/Palm and vice versa.
Summary
57) So far, this is the first strong selling pressure since the end of April for FCPO.
58) The bears are looking for a second leg sideways to down after a brief bounce in the next 1-2 weeks.
i. I’m looking at this 2800 and 2650-00 as potential support levels.
ii. After the pullback is over, we should see an attempt to retest the highs.
iii. The manner of the re-test will give us a lot of information about prices moving forward.
iv. A strong re-test of the highs indicate that the strong selling was merely a pullback in the overall trend and;
v. Should we also get a weakening Dollar moving forward, traders will expect higher prices.
i. However, if we see a lackluster re-test of the highs with choppy trading and weak buying pressure, and at the same time, the Dollar continues to strengthen, then we have to be careful because we may see more bulls close their longs and as price re-test higher and bears starting to scale into their shorts towards the high of the trading range.
59) Can prices for palm continue to trade low continuously next week?
i. I think the odds are that the bears will get their second leg down after a brief bounce.
ii. I will be looking if this 2800 area holds, and if not, for next support around 2650-00 area.
60) I’m more of the view that prices will trade lower for a second leg down first, and then attempt a re-test of the highs after testing support.
i. Is there a scenario where price does not have the second leg down, and price just continue to bounce from here to re-test the highs?
ii. The answer is yes, but slightly less probable. If this happens, then the trend will likely continue much higher as the bears will assume the strong bull trend is resuming and the bull will regain control of the market again.
61) For now, this is what I will be monitoring in the next few weeks
i. If the second leg down for the bears happen as odds highly favor it, and if it does, whether the 2800 area can hold, and if not, if 2650-00 area can hold.
ii. For Dollar to consolidate around the 93.50-94.50, and then attempt to test then 95-96 level, which will be the 3rd leg up. If prices does not continue to strengthen from there, sellers will sell this wedge bounce as a bear rally for price to re-test the recent low’s of 92-93 and then 89-90.
iii. After the second leg down is completed, I will be looking for FCPO to attempt to re-test the highs and the manner in which it re-test will tell us a lot about prices moving forward. A strong re-test signals higher prices moving forward.
vi. There is talk about lower production and also rain coming which will effect the production of FFB. So should this materialize, we will see the production of FFB severely effected which is supportive for prices especially as the current stock level is not particularly high.
v. As for exports, I’m still unsure the effect of China being on holiday and the effects it will have on demand. However with Deepavali coming in Nov, we should see some buying from India taking advantage of the recent lower prices.
62) Can prices break strongly above 3150-3200 in Oct/Nov/Dec which is also the top of the multiyear trading range?
i. There is a chance of that happening especially if the USD weaken considerably and trades down to 89-90 area.
ii. We also have to keep in mind that most breakout fails within a few bars so even though prices may break above the 3150-3200 range and trade higher, there is also a 50% possibility that the breakout will fail, especially if we have a stronger dollar during that period of time. So we have to monitor this closely.
iii. The chance of us getting a strong re-test of the highs moving forward will also increase if the production in Oct is seriously hampered by constant rain and flooding which causes lower production.
63) Another thing I would like to point out is this: Is it possible that we see a stronger dollar, which be bearish for prices for SB/SBO/Palm, but instead we still see slightly higher prices for CPO?
i. Yes it is also possible that the global macro factor be bearish, but due to local factors such as our ffb production falling severely due to seasonal lower production or flooding effecting production, our local market may diverge from the global and related market trends.
ii. A good example of this was earlier in Sept where the global market sold off, while SB/SBO/Palm was still holding on.
iii. Ideally, we would like to see all the factors are aligned, but you may not always get that. So I think it is prudent for us to monitor all of the factors as a whole from the Macro factors effecting prices globally such as the USD, SB/SBO to the Micro factors effecting our local markets (such as production, weather, export, demand) individually.
iv. Markets tend to have periods of strong co-relation but also periods of divergences.
64) I will be monitoring the market accordingly to these parameters that I have laid out above. Should there be any major changes, I will update accordingly in a new post.
Thanks and please get in touch if you would like to leave a feedback.
Thanks and trade safe.
Best Regards,
Andrew (Tech Trader)
