Tuesday, January 11, 2011
CPO may test its uptrend line support at RM3650
Author: Alex Lu
Since its breakout above its "horizontal" resistance ('RR') at RM2800 in October 2009, CPO has rallied very well. A few days ago, it touched the RM3900 mark before entering into a minor correction. Looking at the daily chart (Chart 1) below, we can see that CPO may find support at the 20-day SMA line at RM3750 or its accelerated uptrend line at RM3650. With the MACD indicator showing bearish divergence, CPO is looking toppish and a break of the aforesaid support could trigger a consolidation of a few weeks before the rally can continue.
Chart 1: CPO's daily chart as at Jan 10, 2011 (Source: ifs.marketcenter.com)
I have also appended below the weekly chart for CPO (Chart 2) and the daily chart for Plantation index (Chart 3). If CPO were to break below the RM3750 and/or the RM3650 level (as mentioned above), then Plantation index may correct back to its uptrend line support at 7500. However, this negative scenario (which may not pan out) does not spell the end of the end of the rally in CPO. After a short correction or a consolidation of a few weeks, CPO may re-test the RM3900 level again. However, if CPO were to break below the RM3650 level, it is advisable to take some profit on your investment in the Plantation sector.
Chart 2: CPO's weekly chart as at Jan 10, 2011 (Source: ifs.marketcenter.com)
Chart 3: Plantation's daily chart as at Jan 10, 2011 (Source: Quickcharts)