Tuesday, July 19, 2016

FCPO Outlook 15th July 2016




Palm oil futures managed to recover on last Friday amid some slight rally on soy oil. The soy oil for Aug contract was traded slightly lower about 0.07 cents to 30.76 cents this morning. The active production, stockpiles climbed plus export dwindling concern on palm oil futures are still the main reason why market dropped substantially for the 8 weeks straight. But now, the price action on new benchmark Oct is suggesting a short term recovery. The Bullish candle that pierce above immediate resistance at 2,280. What concern me is the inability for the benchmark month to maintain its gain above 2,280 level. On previous Friday, the Sept contract settled at 2,279 level. Nonetheless, the first sign of recovery as mentioned above the chart is valid, there is a strong Buying interest on last Friday that lead us to believe that palm oil futures is likely to made its way upwards. This is also known as a recovery curve, and if you recall a recovery curve is an average probability for the market to recover substantially after a market has been sold-off for some time. With all that said and done, do not get your hopes high because any recovery curve can fail easily when there is a Bearish news emerge. In order to qualify for sustainable recovery, the first resistance for the Oct contract to overcome would be 2,320 level. If that did not happen, we are likely moving back into a ranging market with 2,185 will serve as support level for the time being. Apart from marginal rise in export number for 1-15th July vs June reported by SGS and slight reduction in export tax, stockpiles and production are still on the upside. For today, range for Oct contract is likely 2,240 ~ 2,280.

Disclaimer: Information and opinions contained in this report are for educational purposes only. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness.

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