INSIDE MALAYSIA: Ringgit Gains

Ringgit rises 0.2% to 3.2892 per dollar; 

pivot point at 3.2912; 

resistance at 3.2849, 3.2797, 3.2682; 

support at 3.2964, 3.3027, 3.3142. 

 * USD/MYR 14-day RSI falls to 68, showing dollar near overbought level 

 * One-month implied volatility rises 12 bps to 7.6550%; this year’s average is 7.9878% 

 * One-month forwards gain 0.2% to 3.2942; 12-mo. contracts up 0.1% at 3.3548 

 * ANZ sees heavy govt bond supply in Malaysia next quarter and continues to favor 7-yr notes over long end of the curve, according to note dated Dec. 27; says fewer MGS and GII will be maturing in 1Q while maturities will be heavier in 2Q and 3Q, making net-duration supply higher in 1Q 

 * Nation saw stock outflow slow last week, partly due to seasonally-thin trading volume, while outflow still continued for 12th consecutive week, MIDF Amanah Investment Bank Berhad says in report dated Dec. 29, citing exchange data; says outflow fell to 114.1m ringgit, lowest in the period...

(Some excerpts from Bloomberg dated Dec. 31)

News: CPO price rally to cool following 1Q14

KUCHING: While crude palm oil (CPO) prices are expected to be buoyant going into 2014, the price rally is likely to cool following the first quarter of 2014 (1Q14) as the oilseed industry is expected to be well supplied. 

According to Alliance Research Sdn Bhd (Alliance Research), regarding CPO prices next year, as inventories have come off to more favourable levels over the course of 2013 and will likely close the year around two million mt, compared to 2.63 million mt at end 2012, the prices are expected to stay fairly buoyant going into 1Q14. 

However, as per seasonality in 1Q, CPO production is expected to decline and prices might trend towards the RM2,800 per mt levels as inventories dip to 1.7 million mt. 

“That said, we do not expect CPO prices to trend into the RM2,800-3,000mt range but instead taper back down as the export scenario going into 2014 is weak,” Alliance Research said. 

Some excerpts from The Borneo Post. 

News: Palm Heads for Second Weekly Gain as Weak Ringgit Spurs Demand

Palm oil headed for a second weekly advance as the depreciation of the Malaysian currency increased the appeal of ringgit-denominated commodity. 

The contract for March delivery rose and fell at least 0.2 percent before trading little changed at 2,630 ringgit ($799) a metric ton on the Bursa Malaysia Derivatives at the midday break. Futures gained 1.8 percent this week. 

Palm oil entered a bull market in November as output fell at plantations in Indonesia, the biggest supplier, and biodiesel demand increased. Malaysia’s ringgit fell against the dollar for a 10th week, its longest losing streak in almost 21 years, after U.S. economic data bolstered the case for the Federal Reserve to further cut stimulus. 

“The weaker ringgit makes palm oil attractive to foreign buyers because it is more affordable now compared to greenback-denominated commodities, especially to U.S. soybean oil,” Teoh Say Hwa, head of investment at Phillip Futures Pte in Singapore, said by phone today. 

Palm oil’s discount to soybean oil was $63.91 a ton today compared with $297.44 at the beginning of this year, data compiled by Bloomberg shows. 

The tropical oil may trade between 2,500 ringgit a ton and 2,700 ringgit in 2014 as biodiesel usage in the biggest producers Indonesia and Malaysia boosts demand, Mohd Emir Mavani Abdullah, chief executive officer of Felda Global Ventures Holdings Bhd. said today. 

Soybean oil for March delivery was little changed at 39.15 cents a pound on the Chicago Board of Trade, while soybeans gained 0.2 percent to $13.08 a bushel. 

Refined palm oil for May delivery climbed 0.2 percent to 5,956 yuan ($981) a ton on the Dalian Commodity Exchange. Soybean oil was unchanged at 6,874 yuan. 

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net 

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

News: Palm Oil May Climb 15% for Mistry as Biodiesel Demand Increases

Dec. 23 (Bloomberg) -- Palm oil seen trading between 2,600 ringgit/t and 2,900 ringgit on Bursa Malaysia Derivatives, says Dorab Mistry, director at Godrej International Ltd. 

 * Futures may climb to 3,000 ringgit/t by March and not be sustained for long at that level, he says in   slides prepared for a National Commodity & Derivatives Exchange event in Mumbai. 

 * NOTE: Mistry maintained predictions made at conference in Indonesia on Nov. 29 

 * “I am not bearish on the vegetable oil complex,” says Mistry. “Palm production is coming down and stocks are also down. Food and bio diesel demand will be higher,” he says 

 * Price outlook assumes Brent at $95/bbl to $115, continued quantitative easing at lower levels and normal weather, he says 

 * Palm and soft oils may go sideways until mid-Jan., he says 

 * Without biodiesel, prices would collapse, he says 

 * Indonesia’s mandate for use of 3.1m tons palm biodiesel by Pertamina is game changer, he says 

 * Palm oil output in 2014 in Indonesia may be 30.5m tons vs 27.5m tons yr earlier, he says 

 * Production in Malaysia may be 19.5m to 19.7m tons vs 19.2m tons, he says 

 * Palm output in Indonesia in 2013 is 500,000t lower than 2012, with final quarter much lower yr on yr, he says 

 * Prices may drop in second half 2014 on strong production, with high cycle in Indonesia starting in May, he says * China may import 70m tons of soybeans, he says

To contact the reporter on this story:

Pratik Parija in New Delhi at +91-11-4179-2032 or

pparija@bloomberg.net

Key Indicator Performance In 2013

Palm Oil Futures short term technical trend trading based the Hourly Key Indicator has recorded the worst performance in year 2013 as compared to the last 5 years that generated yearly average accumulated gross profit of over 1000 ticks or equivalent to RM25,000.00 per contract size basis.

Even though the accumulated losses for this year may be less than 100 ticks but it will definitely put a pressure on technical rend traders. It is really a serious test on the psychology for trading success. The "profit and loss for year 2013" using hourly key indicator has definitely given technical trend traders a superb learning lesson.

Merry Christmas and Happy New Year.

Email Scam In Google Doc Sharing

Traders Readers, careful on the email scam in google doc file sharing. Help remind all your friends to avoid falling a trap and leak out your email and password. Here is the example email I received recently:

Friend,
View the document I uploaded for you using Google Drive storage.
You will find 2 documents for you to carefully go through.

DocuSign-in to Continue...

MUST check the link/URL first before you put in your email and password. If it is a 3rd party link (not google.com), you better don't log in, otherwise, your email and password may have given out to the 3rd party. 

Will Turn Buy If 1230pm Above 2573

The short 2638 will probably take profit and turn buying at 1230pm today. 

The CPO Futures price did have a low 2645 after turning short based on the hourly key indicator, but the profit will be much lower based on the stop and reverse buy signal that will likely happen soon.

2562 Close, What's next?

As the short 2638 had seen low 2558 and closed 2562 on last Friday, the single trade would have already recovered 1/3 of the accumulated loss if traders did buy back at the market close. I wish to say again, the profit taking strategy will always up to traders' own decisions and the blog here is mainly focus on the stop and reverse trade signals using its hourly key indicators.

There is a change of new contract month today and the hourly key indicator will based on the new contract month even though the cpo futures price is higher by 8 ticks from 2562 to 2570. The stop and reverse buy signals will be at high level still for today which is about 2610s level. 

After 7 and 12 Losing Trades...

After 7 and and 12 losing trades as mentioned in previous post, traders who have not enough risk capital will mostly out of trading now already because the hourly key indicator has continuously added another 2 losing trades!!!

It is a number of 9 and 14 that being recorded for such multiple losing trades in a row before seeing a profit trade. The question is how will a technical trend trader be able to withstand such a pressure of losses physically and psychologically? or, if a trader starts with such a bad trade? or, if a trader starts with a bad year with zero profit by end of the year? Think about it seriously if you wish to be a technical trend trader. 

The hourly key indicator made accumulated losses of 214 ticks in the last 14 trades (or 102 ticks in the last 9 trades since the beginning of December)!!! The hourly key indicator will have a bad year for 2013. So, how will a technical trend trader withstand such a heat if he/she is the one that being mentioned in the above paragraph!!!

The hourly key indicator is now holding on short 2638 since 10th December 2013 (not 2648 as stated in the previous post due to the other 2 losing trades) and let's see how far will it go from now on.

7 and 12 Losing Trades

Since the beginning of December, hourly key indicator had encountered losing trades that purely based on stop and reverse trade signals. It was SEVEN (7) losing trades in a row with accumulated losses 68 ticks or RM1,700.00 per contract. There should be a total of TWELVE (12) losing trades in a row if the losing trades included from November with accumulated losses 197 ticks in total or nearly RM5,000.00 per contract.

We finally witness such losing trades without a single profit trade in within that have more than the initial margin requirement for cpo futures trading on Bursa Malaysia Derivatives. This is a very good warning to all technical trend traders who follow strictly on technical indicators that risk capital on cpo futures trading should have much much more than the initial margin requirement. 

If margin requirement is 5000, triple up risk capital to 15000 for ONE contract so that technical trend traders can comfortably and psychologically well prepare for such a bad situation before riding on a few good trends that enough to take back all the loses and extra profits. 

The hourly key indicator is now holding on short 2648 after the cpo futures price was closed 2648 at 6pm yesterday. The SAR buy signals for next 5 hourly trading sessions will be around 2657 to 2661. It means at any 5 trading sessions, key indicator will turn long once cpo futures price is traded above the levels at that particular moment.

Wilmar And the 45%

USD$50 Billion annual trade in palm oil industry is 45% controlled by Wilmar which means the USD$22.5 Billion in palm oil annual trade in this Singapore-listed stock that may have deep impact to all palm oil futures traders!?

News on its pledge to a ‘no deforestation, no peat, no exploitation’ policy, had finally out and if implemented fully, will probably become the industry standard for sustainable plantation expansion and palm oil trading but will it affect the futures trading on Bursa Malaysia Derivatives!?

Just do a google search on Wilmar news and traders should be able to find its new commitment.

Today, the hourly key indicator stop and reverse sell signals will be in the range of 2643 to 2639; or else, hold on the long 2649.

The Danger of Dalian Palm Oil Settlement Prices

This was found in the news quoted in Telequote system provided by Dow Jones Newswire about Palm Oil Futures and Soybean Oil Futures on Dalian Commodity Exchange:

Take a look at the May contract month closing price and the settlement price as shown at the above table. The most active contract month on palm oil futures, MAY, was closed 6160 but settled 6232 with a gap of 72 yuan in just a short period of time. It was basically closed down 80 yuan before it final settled down 8 yuan only. The soybean oil futures had shown similar price movement.

The Long 2651 At 4pm

At 4pm yesterday, key indicator based on hourly technical trend trading had hit a stop and reverse buy signal 2651 against its short 2634 as mentioned in previous post. It had a loss of 17 ticks or equivalent to RM425.00 per contract size.

At the long 2651, the December month has already started with 2 losing trades with total accumulated losses of 23 ticks so far. The long 2651 will hold on from now on unless the next 5 hourly trading sessions on cpo futures show any price below the range of 2641 to 2632 with morning 2 sessions at 2641 and afternoon 3 sessions at 2641 to 2632 as the stop and reverse trade signals. 

SAR Buy Signal Above 2640s

After turning sell 2634, 60-minute key indicator held on its short and saw cpo futures prices hit high 2646 before flushing down to low 2605 towards closing yesterday.

The hourly key indicator will still hold on the short 2634 with stop and reverse buy signals for next 5 hourly trading session in the range of 2640 to 2646 today and may be adjusted lower if there is lower low of cpo futures prices during the day. 

Traders are reminded that the stop and reverse (SAR) trade signals will not be available on time if there is some changes on the cpo futures prices during the next 5 hourly trading sessions that affects the computation of hourly key indicator, and comments will only be posted in next write-up.

Key Indicator Sell 2634

As mentioned yesterday, cpo futures based on hourly key indicator had its stop and reverse sell trade signals being initiated either 4pm, 5pm or 6pm; and, it was the 5pm at 2634 that triggered the sell short signal with 6 ticks of losses against its previous long 2640.

It is now holding on the short 2634 with stop and reverse buying signal in the range of 2649 and 2652 for the next 5 hourly trading sessions. If the cpo futures price is remained below these stop and reverse buy signals level today (they may be lower if prices keep falling below 2602), the stop and reverse buy signal will mostly be adjusted lower which will only be updated if time permitted for next write-up. 

KEY Indicator November Performance

After hitting profit accumulation 115 ticks in mid November, key indicator for cpo futures on hourly technical trend trading suffered 5 consecutive losing trades and the November accumulated profit and loss had turned red again, -14 ticks in total. This will be the 3 months in a row of losses after 4 months of good profits between May and August. The accumulated profit only 12 ticks in 11 months, worst performance ever recorded.

The key indicator now is holding on long 2640 that being carried over from November month, the 60-minute technical trend indicator will do a stop and reverse sell trade if 4pm is traded below 2645, or 5pm or 6pm below 2646 whichever come first.

Why do clever investors make big money mistakes?

Statistics show that most equity investors, including professionals, cannot beat the stock index. Studies have also shown that more than 80 per cent of day traders lose money mainly due to transaction costs as they select shares based on hot tips. There are several reasons for their poor performance but the most frequent mistake is ‘loss aversion’. This is a psychological obstacle which has been consistently affecting their performance, especially in view of the ups and downs that is the normal behaviour of the stock market. 

Loss Aversion - Some investors may object to the implication that loss aversion is a bad thing. After all, it is a very natural behaviour. They might justifiably point out that the tendency to weigh losses more heavily than gains is a net positive attitude. After all, investors who care too much about possible gains and too little about potential losses, run a great risk that can threaten their portfolios. It may appear better to care more about the share price falling than hoping for it to climb higher. 

True enough; loss aversion can be helpful and is part of a conservative strategy. But an over sensitivity to loss can also have negative consequences. One of the most obvious and most important areas in which loss aversion skews judgment is in selling too early and missing the additional profit if you dare to hold it longer. Very often even clever investors who are well versed in stock selection cannot overcome this psychological fear. 

What is tricky about this concept of loss aversion is that it can often lead us in the opposite direction- to hold on to a losing investment for longer than we should. I asked one of my friends why he sold a particular stock instead of selling his other holdings that he bought at higher prices? He said that he did not want to recognise the losses but preferred to lock in the profit. This is the most common mistake committed by investors because they do not want to admit their mistake of picking the wrong stock. Moreover, the profit from the sale could easily cover the losses. 

Studies have shown that on average, it is easier for well managed companies to continue their good performance than for bad companies to improve their poor position. That is why we should not sell good shares too early and retain the bad shares... ( read all if can, or the highlighted phrases. Good article )

It is the excerpts from Mr Koon Yew Yin @ ipohecho