Trailing stop triggered; initiate short positions. The FCPO had a volatile session on last Friday. The commodity started the session with a huge gap down, opening MYR31 lower at MYR3,360. Despite the weak opening, the commodity managed to find its footing at the low of MYR3,337, before moving up towards the session’s high of MYR3,413 and staying there most of the time. Coming into last trading hour, the bulls took profits near MYR3,413, which saw the commodity fall to the session’s low of MYR3,337. The bulls then swiftly seized the opportunity, buying near MYR3,337 and the commodity rebounded to settle at MYR3,380. From the price action, we can see that there was selling pressure near the round figure of MYR3,400. This could be due to the bulls taking profits before the third month of the FCPO futures contract switch to Feb 2021 on 16 Nov. With the RSI still above 70% or the overbought level, we think that the bullish momentum since 5 Nov remains intact and it may re-attempt to cross the MYR3,400 resistance in near term. However, since our trailing stop has been triggered, we switch to a negative trading bias.

Our previous long positions initiated at MYR3,208 – or the closing level of 9 Oct – were closed out at the latest session of MYR3,340 pts. Concurrently, we initiate short positions. To limit downside risks, a stop loss is set above MYR3,413.

The immediate support is marked at the low of 12 Nov or MYR3,321, followed by MYR3,281. On the upside, the immediate resistance is pegged at the recent high of MYR3,413, followed by MYR3,442.

Source: RHB Securities Research - 23 Nov 2020