• Despite inventory fell by 12.2% mom to 1.77m tonnes in Jan-15 on output decline, FCPO dropped by almost 2.3% wow on news that CPO export tax will be resumed by Mar-15. Coupled with unattractive CPO price vis-à-vis soybean oil price and potentially further hike in palm oil import dutyin India, palm oil demand may be capped, hence prices, in our view. Nevertheless, this will be offset by the hike in biodiesel subsidies in Indonesia, should the biodiesel subsidy hike materialize.
• Technically, FCPO is likely to move into sideway trend with downside bias as it is unable to stay above 2345 mentioned previously as well as 5 consecutive black candlesticks; hence, its Uptrend Channel is losing strength. Apart from that, reading from all oscillators also signaled sideway.
• Supports are located near 2240 (50-d SMA), 2200 (uptrend line) and 2150 (23.6% FR) while resistances near 2345 (critical resistance) and 2385 (Upper-Bollinger band) and 2414 (50% FR).

Source: Hong Leong Investment Bank Research - 16 Feb 2015