Bloomberg News

Palm Oil May Advance 11% in ‘Relief Rally’: Technical Analysis

October 13, 2011

Oct. 13 (Bloomberg) -- Palm oil, the most used cooking oil, may advance 11 percent in the next two months as the relative strength index and stochastic indicators signal a rally, according to technical analysis by TransGraph Consulting Pvt.

The most active futures contract on the Malaysia Derivative Exchange may climb to 3,150 ringgit ($1,005) a metric ton, Ravi Chandra, vice president at Hyderabad, India-based TransGraph, said in an interview today. Palm oil last traded above that level in July.

“On the daily and weekly setup, the relative strength Index and stochastic have turned higher from the oversold region,” Chandra said. “Any further weakness would have limited potential below 2,750-2,700 ringgit and eventually result in a relief rally” in the next two months, he said.

The December-delivery contract fell 0.7 percent to 2,844 ringgit a ton in Kuala Lumpur today. The commodity has lost 25 percent this year on prospects for rising supplies from Indonesia and Malaysia, the biggest growers.

“Futures prices are consistently lowering since the February high of 3,967 ringgit and have recently broken below the long term rising trend line at 2,950 ringgit,” Chandra said. “This indicates the existing bearish trend is likely to stretch further in the long term. Prices could turn lower and likely to resume the overall bearish trend towards 2,400 ringgit in more than six months after the relief rally.”

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. The stochastic indicator measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether prices will rise or fall.

--With assistance from Manish Modi in New Delhi. Editors: Thomas Kutty Abraham, James Poole

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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