ZLBT Chats

Monday, November 30, 2009

CPO Pullback likely but not a bear crude palm oil futures mart 30 Nov 2009

OBSERVATIONS: The Kuala Lumpur CPO futures market is likely to beat a retreat in early trade this week – for two reasons.

The first is that, having risen to a 15-week high of RM2,521 a tonne last week, this market is high up in technical overbought territory and is ripe for a correction. The actively-traded February 2010 contract settled last Thursday (the market was closed last Friday for the Aidiladha festival) at RM2,482, up RM63 or 2.60 per cent over the week.

The second reason is that, having been closed last Friday for the Aidiladha holiday, this market was unable to react to the fallout from the crisis of confidence resulting from the Dubai sovereign debt deferment (many analysts call it a default). It will have to play catch-up (or catch-down?) with the falls in world equities and commodities markets overall.

The Dubai government, through Dubai World, reportedly owes US$59 billion (US$1 = RM3.38) and has asked its creditors for a six-month deferment in repayment. But there’s no guarantee repayment will be forthcoming even after the six months is up.
If the present crisis of confidence is confined to the Gulf region, it could blow over and turn out to be a storm in a teacup. But if it escalates into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s, then world equity and commodity markets will feel the pain.

The Palm Jumeirah is a man-made island created using land reclamation by Nakheel, a company owned by the Dubai government. It is one of three islands called The Palm Islands which extend into the Persian Gulf, increasing Dubai’s shoreline by a total of 520 km. The Palm Jumeirah is the smallest and the original of three Palm Islands (Palm Jumeirah, Palm Jebel Ali and Palm Deira) under development by Nakheel. It is located on the Jumeirah coastal area of the emirate of Dubai, in the United Arab Emirates (UAE).
There’s no telling now how the present debacle will pan out. So, market players may well heed this market maxim: when in doubt stay out. Which could halt the present short-term palm oil futures bull run in its tracks.

Conclusion: RM2,340 is the immediate short-term support level and this market has quite a long way to fall from last week’s closing price of RM2,482 before it can technically be classified as having turned into a short-term bear.

Thursday, November 26, 2009

TECHNICAL ANALYSIS >>> Composite Index 26/11/2009 / 综合指数 2009年 11月 26日

Composite Index 26/11/2009
On Thursday, the FBM KLCI tested the Bollinger Middle Band, but failed, and ended 0.39 points lower. This shows that the Bollinger Middle Band is still the dynamic resistance for the KLCI, while the next resistance is still at 1300 psychological level. Support for the KLCI is at 1270 Automatic Fibonacci Retracement.

As indicated by A, the KLCI is still supported by the L1 uptrend line, and the 1270 Fibonacci Retracement is also over-lapping the L1 uptrend line, and therefore, it is going to be an important support. If the KLCI should break below the L1 uptrend line, it would be an end to the uptrend.

As indicated by B, total market volume increased 1.5%, with volume still below the 40-day VMA level. In short, this suggests that the market is relatively quiet, as the KLCI is now moving sideways.

As circled at C, the stochastic breaks below 30% level, entering the short term bearish region. If the Stochastic should remain below 30% level, the market movement for the short term is expected to be bearish biased.

As shown on the chart above, the Bollinger Bands is now narrowing, and the significance of the Stochastic signal is reduced. Nonetheless, the short term signal of the Stochastic has to be confirmed with the re-expansion of the Bollinger Bands. If the KLCI should remain below the Bollinger Middle Band as the Bollinger Bands expand, it would be a downside signal, and otherwise, an upside signal.

综合指数 2009年 11月 26日
富时综合指数微跌0.39点,综指虽然一度上探布林中频带(Bollinger Middle Bands),惟还是无功而返,综指精确的在布林中频带遇到阻力,所以布林中频带成为综指接下来的主要阻力,综指另一道的阻力水平维持在1300点的心理关口,支持水平则落在1270点的费氏线。




如图所示,由于布林频带(Bollinger Bands)目前正处于一个窄小的格局,所以随机指标跌破30%带来的综指短期下跌讯号减弱,因为一切趋势的讯号都得等到布林频带再度打开时才能决定。通常当布林频带开始明显的打开时,若综指仍然处于布林中频带以下的话,那综指将被确认形成一个下跌的趋势,反之亦然。

BURSA MALAYSIA >>> Closing Infos, Volume, Gainers, Losers, Indices All In Graphics and Images 26 Nov 2009

Please click on image to ENLARGE
Thank You


Can palm oil ever be sustainable?

Once hailed as a healthy alternative to trans-fats, as a green wonder-fuel and as a driver of South-East Asia's economic prosperity, palm oil's image has taken quite a beating recently.

Now seen as a biofuel baddie -- palm oil biodiesel generates 10 times more carbon dioxide than petrol -- it is also blamed for deforestation and for driving species such as the orangutan to the verge of extinction.

But even if you don't use biofuels you have probably used palm oil several times today without even knowing it. Palm oil is in a vast range of consumer products, from margarine to washing powder, and is probably in your favourite ice-cream, coffee creamer or even your lipstick. You might not be aware of this because many manufacturers simply call it "vegetable oil" on the label, often to try to avoid the stigma that has become attached to palm oil.

Campaigns by groups such as Friends of the Earth in the United Kingdom and Europe saw consumer boycotts of products containing palm oil forcing retail giants to put pressure on producers to prove that their product is sustainable and eco-friendly.

Green labelling
So the palm oil industry, environmental groups and corporate palm oil consumers, such as Unilever, signed up for the round table on sustainable palm oil (RSPO), a green-labelling certification process for palm oil produced in line with environmental best-practice criteria. But instead of taking some of the heat out of the battle, the RSPO seems destined to become another source of conflict.

The various parties to the RSPO seem to agree on very little. A fresh row erupted earlier this year when Britain's advertising standards authority upheld a complaint by Friends of the Earth and ruled that a Malaysian Palm Oil Council advert was misleading. The ad claims that oil palm plantations are essentially "planted forest", absorbing carbon dioxide and creating biodiverse habitats for fauna and flora, and that Malaysian palm oil has been sustainably produced since 1917.

The palm oil industry was infuriated and Malaysia's minister of plantations and commodities, Peter Chin, accused Western NGOs such as Friends of the Earth of "bias against palm oil" and expressed deep concern about "the negative campaigns targeting the palm oil industry".

Sarala Aikanathan, director of Wetlands International Malaysia, says: "You need to call a spade a spade and a plantation a plantation. A plantation is not a planted forest-- it is monoculture and does not contain the biodiversity of a natural forest." But she points out that there is a need to balance conservation and development. "I'm not a believer in pure conservation -- it just doesn't work if the local people suffer."

The timelines for implementation of RSPO criteria are unclear: environmental groups want strict deadlines for compliance, while the palm oil industry sees these criteria as a longer-term goal: "We will work towards them but it doesn't mean we will have to comply with this next year," Chin said at a conference on sustainable palm oil in April. He pointed out that 40% of Malaysia's oil palm is planted by smallholders who "need to be educated about RSPO principles".

But environmental groups say the planet simply doesn't have that much time: "All this talk of sustainability is lies," says Hardi Baktiantoro of the Centre for Orangutan Protection, an Indonesian NGO. He dismissed expert predictions that the orangutans will become extinct in 10 years. saying "I think it will be in the next year or two. It's a crime," he says.

A Greenpeace report, How Unilever Palm Oil Suppliers Are Burning up Borneo, released last week finds that RSPO members are expanding their plantations into forests and peatlands in Kalimantan -- the Indonesian part of Borneo -- in breach of both the law and RSPO principles. Greenpeace's Tim Birch dismissed the RSPO as a green-washing exercise: "Five years on and there isn't one drop of sustainable palm oil on the market. They talk about sustainability, but the destruction continues. There is no sense of urgency. By the time we achieve sustainability there will be nothing to be sustainable about."

'Western hypocrisy'
There is a view in the palm oil industry that Europe, having developed its economy and destroyed its own forests in the process, is now being hypocritical in wanting to dictate terms to emerging economies. But environmental activists say that they don't care what Europe has done; they want to preserve their own ecological heritage. "The wildlife that is affected is ours, not Europe's," says Darrel Webber of World Wildlife Fund (WWF) Malaysia. "We have the right to develop, but what about local rights to clean water and to fish?" A recent WWF study found that effluent from palm oil mills and chemical and fertiliser run-offs enter rivers on which local communities depend and there is a high concentration of heavy metals, particularly lead, in the fish.

Who benefits?
In Malaysia palm oil companies are credited with building roads, schools and clinics for their employees. But Baktiantoro, who works with communities in Indonesia's forests, says: "Economic development for who? Companies or local people? It is often difficult for the community to access water - one tree drinks 100 litres of ground water each day. The government might be getting tax from palm oil but the local people get nothing."

Malaysian palm oil producers say they aren't destroying virgin forest, as most of the land converted to oil palm plantation used to be agricultural land used for rice or rubber production. Environmental campaigners say most flagship species, such as orangutans, already live in degraded or secondary forest areas and fear that this conversion will destroy even that habitat. They say that while Malaysia might not be destroying any more virgin rainforest, there is a huge expansion of oil palm in Kalimantan and that much of this is driven by Malaysian-owned companies, such as Sime Darby, the world's largest oil palm plantation company.

While Greenpeace is calling for a moratorium on oil palm expansion into rainforest and peatland areas, Malaysian NGOs are wary of setting themselves up as opponents of palm oil. Webber says that in fairness to the industry "it is the only commodity trying to achieve sustainability standards". The WWF will continue to work with plantation owners to achieve solutions, particularly through planned biodiversity "corridors of life". These corridors will link coastal mangrove swamps with upland forest reserves, allowing wildlife to move freely and remove bottlenecks caused by drainage canals and electric fences on plantations (orangutans are notoriously afraid of crossing water). It will also reduce conflicts between animals and humans, caused by the fact that "elephants can't read maps and orangutans can't fly".


Wednesday, November 25, 2009

FOREX >>> Practice Accounts and “Going Live”


Hi ZL,

I am looking to nurse my small practice accounts into larger accounts gradually. I am using the Forex practice accounts. Many times I have made mistakes and decimated my small practice accounts, which tells me that I am not ready to do real trading with these accounts. How would you suggest that I nurse these smaller accounts into larger accounts? Thx

.......... from Belinda

Hi Belinda,

I have two points for you to consider. The first is that when you trade practice accounts, your mindset is different than when you trade with your hard-earned money. You tend to take more and greater risks with play money, which is good. Aside from teaching you the mechanics of trading, practice trading teaches you about taking risk. So, take your time and don’t worry about losing.

Having said that, in order to stop losing, you have to teach yourself a new mindset when trading practice accounts. You have to move to the other extreme and become more conservative, take less risk. Make smaller trades with tighter targets. Slowly build up your practice accounts with small profits. Teach yourself to think as if it were your money on the line. It will take time, but you can do it. When you consistently start taking small profits, you might well be ready.

The second point is that at some point you will have to drop the training wheels, if you want to trade. Eventually, you will have to test your abilities with real money. The time may be sooner, or it may be later. Either way, you will know the time because you will “feel” the confidence to make the move. You will know, and until you know, keep practicing will your small accounts. Keep in mind, when you do “go live,” stay conservative, even if it means taking small losses.
The one thing to remember is that the only difference between trading practice accounts and real money is you, the mindset you bring to the game. This, my friend, will prove to be the difference between success and failure, assuming you do all your work and learn how to trade, assuming your personality and emotional makeup “work” in the trading world.

Trade in the day; invest in your life …


TECHNICAL ANALYSIS >>> Composite Index 24/11/2009 / 综合指数 2009年 11月 24日

Composite Index 24/11/2009
On Tuesday, the FBM KLCI was supported by the 1270 Fibonacci Retracement, and rebounded to close at 1272.09 points, upped 1.21 points. However, it is still resisted by the Bollinger Middle Band. Therefore, the Bollinger Middle Band is still the immediate resistance for the KLCI while other resistance is at 1300 level. 1270 Fibonacci Retracement is still the support for the KLCI.

As shown on the chart above, the Bollinger Bands is still contracting, suggesting that the KLCI is still consolidating. Nonetheless, since the Bollinger Bands is now very narrow, it implies that the consolidation is near its end, and when the Bollinger Bands should re-expands, it would be a signal of a beginning of a new movement, and the direction of the new movement shall be determined by the relative position of the KLCI above or below the Bollinger Middle Band.

As indicated by B, total market volume declined 6%, with volume below the 40-day VMA level. This suggests that the market is now relatively quiet as the KLCI is consolidating. Technically, it is normal to have lower volume during a consolidation. But if the KLCI should its uptrend, volume above the 40-day VMA level is a must, in order to sustain the rally.

As circled at C, the Stochastic is testing the 30% level. Therefore, it has not shown a short term bearish signal for the KLCI yet. If the Stochastic should break below the 30% level, it would be a short term bearish signal for the KLCI, and the short term movement for the KLCI is expected to be on the negative side.

In short, the KLCI is still consolidating while preparing for a new movement. If the Bollinger Bands should re-expand with the KLCI above the Bollinger Middle Band, it would be a positive signal for the new movement. Otherwise, if the KLCI should stay below the Bollinger Middle Band as the Bollinger Bands re-expands, it would be a bearish signal for the KLCI.

综合指数 2009年 11月 24日
富时综合指数在1270点的费氏线支持水平稍微回弹1.21点,以1272.09点闭市,惟综指在布林中频带(Bollinger Middle Band)遇阻,所以这布林中频带是综指当前的动态阻力线,综指另一道的阻力水平是1300点的心理阻力关口,支持水平则是1270点的费氏线。

如图所示,布林频带(Bollinger Bands)进一步收窄,这显示综指依然维持调整巩固的格局,无论如何,这非常窄小的布林频带亦表示综指已经接近摆脱当前僵局,因为接下来只要布林频带开始打开,那综指将会出现一个新的趋势,而新的趋势将取决于综指当时处于布林中频带的相应位置。




Tuesday, November 24, 2009

Rains bring prospects of new highs for crude palm oil futures

OBSERVATIONS: Rising floodwaters in most parts of the country lifted the Kuala Lumpur CPO futures market to a 14-week high last week. And if the weatherman’s forecast is any guide this market can expect to hit new highs in the near-term future.

The actively-traded February 2010 contract settled at the intra-week high of RM2,486 a tonne, over the week. Closing at the absolute high point of the week’s trading range is a bullish candlestick pattern pointing to more upside movement ahead.

The north-east monsoon which lashed most parts of the country was the principal catalyst behind this market’s well over RM250 leap in price over the past fornight. TV newscasts of the many landslips caused by rainstorms and floods in rural areas contributed to bullish sentiment.

For sure the floods not only haved hampered the harvesting of palm oil fruit, they also must have disrupted the logistics of transporting the fresh fruit bunches to the refineries and palm olein to the ports for export. What’s more, the weather forecast is for more rainstorms – and therefore more floods – in the near-term future.

And fortuitously, at least for market bulls, export market monitors Societe Generale de Surveillance (SGS) and Intertek Agri Services (IAS) chimed in with scintillating export estimates. SGS and IAS’ combined export estimate of an average of some 696,000 tonnes for first half November 2009 was not only the highest for any month-to-date estimate this year, it also was about 126,000 tonnes or 17.0 per cent higher than that for the corresponding period in October 2009. That bodes well for a reduction in end-November 2009 stocks of palm oil.

Conclusion: This market can be expected to make more headway on the upside in early trade this week, before coming up against the immediate RM2,500 a tonne overhead resistance level.


A Game Plan Is What Traders Need


Hi there ZL ......

Everybody talks about developing a trading strategy. This is difficult when one has not traded before. All is a bit overwhelming at the moment, with little success in the trades already performed. What strategy do you follow that you are successful? Thank you.

......... Elaine from Foolstown.


Hi Elaine,
This is about you, not me. What are you willing to do to learn how to trade? Are you willing to stop being overwhelmed and get to work devising your own strategy? If so, consider working with the following strategic outline. Understand, though, in any competitive framework, a strategy is the overall plan and tactics are the “plays” one makes to achieve the strategic goals.

1. Monitor, analyze, and evaluate the overall markets on a daily basis. Learn the ebb and flow. Learn the intermarket relationships that affect the ebb and flow.

2. When the overall market conditions are favorable, search for potential trades in specific markets (ex: forex, commodities, futures, equities), or specific market sectors (ex: technology, retail, biotech, aerospace).

3. When potential trades are found, confirm them with reliable fundamental and/or technical tools, such as financial/economic data or common technical indicators. Select those with the highest probability of success.

4. Evaluate your potential “position” in the trade. Define quantity, cost, profit target, and potential loss. Define entry and exit positions that meet the defined goals.

5.Execute the trade with the defined entry point. Set it and forget it. If you get in, so be it. If not, another trade waits. Immediately set the predefined stop as the downside exit point. Set it and forget it. If you get stopped out, so be it. Another trade waits.

6. Monitor the trade. If it heads toward the stop, let it go. If it heads toward profit, consider adjusting the stop to minimize losses. If it hits or surpasses the profit target, consider tightening the stop to protect profit, otherwise take the profit, and call it a day. If you tighten the stop, and the trade continues moving favorably, consider resetting to a trailing market stop to let the profits run.

7. When the trade is over, evaluate it. What went right and what went wrong? Did you get lucky, or did you execute according to trading plan you devised?

8. Enter the results of the trade in an accounting program.

9. Track your trades, meaning know the win/loss ratios, know the average gain/loss per trade, and know total dollar gain or loss.

10. Start preparing for the next trade.

Keep in mind, the above is a general strategy........
The tactics one uses will vary according to personality, knowledge, experience, and intuition, but one element common to all strategies and tactics is discipline. If you set up a plan, and you meddle with it because you lack faith in it, you will lose. If you meddle because intuition whispers in your ear, that is acceptable, if that intuition derives from years of achieving the goals of a strategy by executing tried and true tactics.

Trade in the day; invest in your life …


TECHNICAL ANALYSIS >>> 综合指数 2009年 11月 23日 / Composite Index 23/11/2009

综合指数 2009年 11月 23日

如图所示,布林频带(Bollinger Bands)进一步收窄(-31%),所以综指维持在调整巩固的格局,无论如何,由于布林频带收得非常窄小,这显示综指将有望在近期内摆脱调整巩固的格局,所以接下来若布林频带开始打开的话,而综指又能再度回弹至布林中频带(Bollinger Middle Band)以上,那综指将有望恢复上扬的趋势。




Composite Index 23/11/2009
On Monday, the FBM KLCI ended slightly lower, while precisely supported by the 1270 Fibonacci Retracement, closing at 1270.88 points. This shows that the 1270 Fibonacci Retracement is still the support for the KLCI while the resistance remains at 1300 psychological level.

As shown on the chart above, the Bollinger Bands contracted 31%, suggesting that the KLCI is still consolidating. Nevertheless, since the band width is now very narrow, it implies that the consolidation of the KLCI is nearing its end. If the Bollinger Bands should re-expands with the KLCI returning to above the Bollinger Middle Band, the KLCI is likely to resumes its uptrend.

As indicated by B, total market volume declined 5.9%, with volume below the 40-day VMA level. This is a typical behavior during market consolidation, as investors are staying on the sidelines while waiting for some fresh leads. Nonetheless, if the KLCI should resume its uptrend, volume above the 40-day VMA level is a very important element to sustain the uptrend.

As circled at C, the Stochastic breaks below 50% level, suggesting that the short term movement of the KLCI is still weakening. If the Stochastic should break below 30% level, it would be a short term bearish signal for the KLCI.

In short, the KLCI is still consolidating while preparing for a new movement; and the direction of the new movement is yet to be revealed, with the expansion of the Bollinger Bands width and the relative position of the KLCI againts the Bollinger Middle Band.