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Dalian Palm Oil Rally Peaking on ‘W’ Pattern: Technical Analysis

A rally in palm oil futures in China, the biggest consumer of cooking oils, may be peaking as momentum slows, according to technical analysis by Shanghai Cifco Futures Co.

Price charts show the commodity has completed a W pattern that started in June, ending with a small decline, analyst Zhu Gang said by e-mail yesterday.

The 14-day relative strength index for the Dalian contract closed at 73 yesterday, with scores above 70 indicating the futures may be overbought and ripe for declines.

“The W pattern shows this rally has lost steam and short selling may be a good bet,” Zhu said.

Palm oil for delivery in May in Dalian fell 0.9 percent to 6,124 yuan ($1,007) per metric ton yesterday.

The commodity faces a “bearish backdrop” with record global oilseed output this year and investors will await a report due from the U.S. Department of Agriculture on Nov. 8 for more data on supply and demand, he said.

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

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