POINTERS: Palm Oil Price Analysis and Outlook for 1st Half of 2013

By: Mr. Benny Lee

Mr. Benny Lee is a private trader, trainer, speaker and practitioner of technical analysis for 10 years. He has conducted trading and technical analysis workshops for private and institutional investors in Malaysia, Singapore, Hong Kong, Thailand, Vietnam and Pakistan. Some of his courses such as CPE (Continuing Professional Education by the Securities Commission) have been approved in Malaysia. He has also spoken in many international conferences such as GlobOil, India, Gold and Options conferences in Thailand (AFET), the Asean Rubber Conference, Palm Oil Conference in Jakarta, POTS by MPOC (Malaysian Palm Oil Council) and many others. He has also presented in Exchange-organised events in Malaysia, Singapore, Vietnam and Pakistan. He has presented to a wide range of participants from a group of 10 people to a large audience of 500 people. Mr. Lee writes articles on technical analysis for Smart Investor (Monthly financial magazine in Malaysia), Busy weekly (Weekly financial newspaper), Pulses (Monthly financial magazine by the SGX) and Palm Oil Fortune (Monthly Palm Oil publication). He also appeared on Channel News Asia (Singapore) and BFM89.9 (Malaysia) for his views and commentaries on the financial markets. He graduated in Business Administration and obtained the world’s best paper in Financial Management from the Association of Business Executives, U.K.

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Palm oil prices were being pressured in the past eight months as inventory climbs to historical high levels in the last quarter of 2012. Are prices of crude palm oil going to continue to decline or start to turn bullish this year? Price forecasting has always been a major indication for any businesses and economy for developing strategies. However, price forecasting is never easy as there are many theories and many factors that may affect price movement. One way to forecast price is through chart analysis and this paper aims to use chart analysis to forecast the price action for crude palm oil futures in the near term with high confidence level. This paper will describe the methods use, such as trend analysis, pattern and cycle analysis and support and resistance analysis to determine the next course of price direction and make near term forecasts. Other factors such as production, export and inventory of palm oil, crude oil prices, US dollar and soybean prices will be taken into consideration to support the forecast made using chart analysis. A conclusion will be made on the price forecast together with the forecast validity, and hopefully it will serve as a guide to benefit market players.

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Questions & Answers (12) :

Akram Hasanov

10 years ago

Dear Benny Lee, It would also be useful if you analyze the volatility movements of palm oil prices. From your plots, the price movements seem to follow martingale process but how about the volatility? How volatile will be the prices within next few months?

Rohit

11 years ago

Hi Benny! Do you think that price of CPo can shoot up to 2800 in March?

Benny Lee Wan Yu

11 years ago

Hi Rohit, Since 2011, price of palm oil has been very bearish as compared to soyoil and palm oil has been trading at a huge discounts. The discount is even more this year. Since the peak on April last year, CPO prices have fallen 32% while soyoil 14%. If price of soyoil were to fall US$11 per bushel, that's a 22% fall from the soyoil price of US$50. That would mean that the CPO discount would be smaller. So if price of soyoil falls slightly, we would not see much impact on CPO. But, if price do fall 22%, I am expecting price of CPO to fall about 10%.

Benny Lee Wan Yu

11 years ago

Dear Brenda, With the current outlook and my price forecast, Average CPO price should be between RM2,500 and RM2,600

Benny Lee Wan Yu

11 years ago

Dear Brenda, With the current outlook and my price forecast, Average CPO price should be between RM2,500 and RM2,600

Anonymous

11 years ago

Hi! What consequences will CPo prices face if soyabean go down to 11 or 12 dollar per bushel? And what will happen if palm oil god Mr.Mistry again predict a bear market on his 6th March speech?

Rohit

11 years ago

Hi! What consequences will CPo prices face if soyabean go down to 11 or 12 dollar per bushel? And what will happen if palm oil god Mr.Mistry again predict a bear market on his 6th March speech?

Brenda Chow

11 years ago

What do you think the average price for cpo will be this year?

Benny Lee Wan Yu

11 years ago

Hi A.K.M. Fakhrul Alam, Yes it is one of the factors, but is currently the factor that puts pressure on prices

A.K.M. Fakhrul Alam

11 years ago

Inventory may be one of the factors, but may not be the main factor as experianced from past behavior of the market.

Benny Lee Wan Yu

11 years ago

Dear Msusaihli, The main factor would be the inventory, which reached record high and is still currently high due to unexpected output in 2012 and lackluster demand in 2012. This put pressure on palm oil prices. Demand and output affects inventory, While output is more predictable, demand would be the main factor. Compeion from Indonesia affects demand for local palm oil as well.

Msuhaili

11 years ago

Hi Benny Lee, as you mentioned in your analysis there are several factors affecting the price movement of FCPO. Which one is the most prominent factor affecting the price for the first half and second half this year?