Palm Oil in China May Jump to Two-Year High: Technical Analysis

Palm oil futures listed in China, the biggest consumer of cooking oils, may advance to the highest level in more than two years as the market gathers bullish momentum, according to technical analysis from Xinhu Futures Co.

The moving average convergence-divergence indicator for the most-active Dalian palm oil contract is crossing the signal line, indicating a “strongly bullish” trend, analyst Chen Sijian wrote in a Chinese-language report. The contract gained 0.2 percent to 9,084 yuan ($1,366) a metric ton on Dec. 3 and extended the advance to 9,230 yuan today.

Palm oil futures soared to 9,772 yuan on Nov. 10, the highest level since July 2008, before plunging more than 11 percent in the nine subsequent trading sessions as the State Council vowed to curb speculation in commodities to control inflation. Some investors considered the commodity may have started a period of decline, Chen said.

“Last month’s drop was merely a correction in a longer rally, and palm oil may yet” exceed the peak last month, Chen said. “We’re seeing a classic bull setup” barring government intervention, he said. The benchmark global contract for palm oil is listed on the Malaysia Derivatives Exchange and the Chinese and Malaysian markets influence each other, he said.

The chairman of Xinhu Futures, member of all three of the country’s commodity exchanges, is Ma Wensheng, former president of China International Futures Co., one of the nation’s biggest brokerages. Ma has been described as the “most influential” person in the Chinese futures industry by the state-run Securities Times newspaper, according to Xinhu’s website.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

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