Palm Oil’s Bearish Technical Signals

Palm oil is one of the markets facing a correction. The Malaysian crude palm oil contract for August delivery has fallen 18% from its May 18 high as of the June 11 close. This compares to the 9.2% drop seen in soybean oil since reaching its recent June 7 all-time high.

As seen on the attached chart, the benchmark August Malaysian crude oil contract fell for a fifth straight session on June 11, closing 4.7% lower for the session and by the largest percentage loss seen during these five days. During the week, this contract has fallen by 11.3%, reaching its lowest level seen in seven weeks.

There have been several breaches of support that has led to further technical selling over the week. The June 8 trade resulted in a close below the contract’s 20-day moving average, while for the sixth time in 10 sessions. The June 11 trade saw a bearish gap lower formed on the chart, with the June 11 high below the June 10 low. The June 11 close ended below the contract’s 50-day moving average (purple line) and closed below the 38.2% retracement of the move from the contract’s low to the contract high, calculated at 3718 ringgits in local currency terms. In addition, today’s move breached the support of the gap in traded formed in the April 21-to-April 22 sessions.

Given this week’s move, potential support lies at the contract’s 100-day moving average, which indicates a further 3.2% drop from this week’s close, or the 50% retracement line, which is 4.8% below this week’s close.

It is interesting to note that the stochastic momentum indicators on the daily chart have moved into oversold territory, which may slow technical selling, although the weekly chart (not shown) shows these indicators trending lower and near the middle of the neutral zone on the chart, which indicates further downside is possible.

Cliff Jamieson can be reached at

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