Golden Agriculture

CPO\'s price closed at RM2,419, up RM48 (2.02%), effectively breaking out of a 2 year down trendline which started after price peaked in early 2008 at RM4,330. This down trendline was tested twice earlier this year but not broken. We are seeing this breakout translate into some strength in the price of CPO producers like Golden Agriculture. I believe that this is something that will continue into the new year and the Chinese New Year when CPO might retest its 2009 peak of RM2,790. Support has formed for Golden Agriculture at 45c. Gap support coincides with 20dMA at 44.5c. 20wMA support is at 44c. Successfully breaking out of 47c would indicate a target of 52c.

Price closed at 48c forming a white candle today, pushing the upper limits of the bollinger band. MFI has formed a higher low and it seems that a retest of the previous high of 52c is on the cards. On the weekly chart, the bollinger band is beginning to squeeze. However, successfully taking out 52c might not translate into much more upside as further resistance is provided by the descending 100wMA at 52.5c this week.

CPO price has been going up due to increased buying in Europe, India and China. The bad weather has caused production to decline marginally and inventory is being drawn down. Domestic demand in Indonesia remains strong. It is a daily necessity that doubles up as a biofuel. I continue to believe in the future of Crude Oil and that will have a direct impact on the price of CPO. Darryl Guppy predicts that Crude Oil will hit US$100 after Christmas from a TA perspective. I have read elsewhere predictions of between US$85 to US$90 a barrel. Golden Agriculture remains the cheapest CPO counter, no matter which parameter you use as a measurement. It is also the most levered to CPO price. I remain confident of its future in the next 12 months. However, in the near term, there would probably be limited upside from a TA perspective and it is almost fully valued from a FA perspective. This is one counter that I can foresee myself trading for the next 12 months.

Golden Agriculture is seeing some nice momentum as MFI formed a higher high. It seems to be in the process of forming a higher low. OBV has formed a higher high and a higher low, indicating continuing accumulation. The current weakness can be attributed to a pincer like action due to the rising 20wMA at 45.5c and the falling 100wMA at 52.5c. Any weakness in price should be contained by the 20wMA at 45.5c, the rising 50dMA at 45c and the rising 100dMA at 44.5c. Longer term MAs are all rising decisively indicating that the longer term trend for this counter is still up. I would accumulate if price weakens to supports.

Palm oil prices are poised to rise “sharply” next year as demand remains robust amid potential supply disruptions from El Nino, according to Dorab Mistry, director of Godrej International Ltd...... Consumption in China and India, the two biggest importers of edible oils, is increasing and “rising from an already high base,” Mistry said. Godrej is the biggest edible oils supplier to India. Indonesia and Malaysia produce about 90 per cent of the world’s supply. Mistry, who correctly predicted last month that palm oil futures would reach RM2,400 a metric ton by the first quarter of 2010, said prices may even climb as high as RM3,000 by the end of next year if crude oil advances to US$100 a barrel. .............................................. CPO at RM2,489 yesteray. I would accumulate Golden Agri on weakness.

Crude Palm Oil Prices Likely MYR 2,800 – 3,000 / Ton By 2010 1st Quarter: Mistry CPO at RM2,562 today, up RM84 (3.39%)!