Soy oil remains volatile ahead of the Union Budget in Indian Market

Weak global cues of soy oil and crude oil keeps Indian market sentiments subdued in physical as well as futures markets.

Physical markets traders however opine that sooner or later prices are bound to improve with the start of summer in north India after Holi Festival.

They seems downside limited in India market.

Union Budget in India is also scheduled next week on 28th Feb.

Oilseeds industry in India is in favor of gradual increase in the import duty on the refined edible oil. This is to be seen what happens in Budget.

Thus market will remain more speculative and will  follow less demand and supply fundamentals. 

A cautious trade is advised amidst high volatility.

NCDEX Soy oil April Contract

India: Soy oil closes up by 1.87% during week ending 14 Feb 2015

Finally Indian soy oil market closed in green amidst improved volumes and positive global cues in soy oil and crude oil.

NCDEX Soy oil April Contract

Weekly Levels: ( 9-14 Feb 2015)
Open = 599.40
Low = 585.10
High = 605.90
Close = 605.90
% weekly change between Open and Close = (605.90-599.40)/599.40 = 1.08%

Thus on weekly basis a gain of 1% was seen in the Indian soy oil futures market.

Technically a BUY signal is almost confirmed by the moving averages. 5 day and 10 day Exponential Moving Averages (EMA) have changed direction towards upside and today's price has given closing well above the 5 and 10 days EMA. The 5 day EMA has crossed from below to 10 days EMA making a golden cross.

Thus, it seems that next week starting from 16th Feb, the market should trade positive. 

On daily basis chart, the SUPPORT AND RESISTANCE ARE GIVEN BELOW

S1 =595    S2= 587    R1 = 612   R2 = 615

Sharp Correction expected in soy oil in short term in India

Update: 10.06 PM IST

As described in the previous post, the price fall has deepened in the Indian soy oil market. The fresh weakness in the international crude oil and soy oil prices at Chicago board of Trade (CBOT) has further discouraged the bulls.

The way prices are falling, it seems that very sharp correction is waiting shortly.

---

For more details please see the below mentioned posts on soy oil and WORLD VEGETABLE OILS FUNDAMENTALS FOR 2014-15.

Soy Complex Market Fell in India for the third consecutive day

Indian Soy oil market shows weakness on lacklustre physical market demand. The spot market prices have fallen.

As we stated in our earlier post that soy oil was getting resistance on higher level and buyers were reluctant to make fresh buy at higher levels.

If we look at the global vegetable oils supplies, we find that fundamentals are in favor of bears. (Please check the earlier post : 9 Feb 2015: WORLD VEGETABLE OILS FUNDAMENTALS FOR 2014-15)....

The current market situation suggest that market is unlikely to witness any major upside in near future.

Currently the NCDEX Soy oil Feb contract trades at 613.15 (-1.26%) at 4.39 IST.

World Vegetable Oils Fundamentals for 2014-15

Major Highlights:

In this report, the supply and demand of vegetable oil is assessed for world. The data for analysis were taken from FAS, USDA website. There may remain some variation from source to source, but the broad picture remains more or less same. Thus the results do not vary much.

Below are the major findings of the Analysis.

Ample Supplies:

• The production and supply of Vegetable oils during 2014-15 is quite comfortable as compared to 2013-14 as well as 2012-13 as is evident from the graph shown below.
• The Production during 2014-15 is estimated to increase by around 3.88 with respect to (w.r.t) 2013-14 and 9.73% w.r.t to 2013-14.
• The Total Supply is also estimated to improve by around 4.18 % during 2014-15 vs 2013-14.
• Thus there seems comfortable supply situation of vegetable oil for 2014-15.
• In consumption also there is increment but at the same time, ending stocks are also expected to increase by around 1% as compared to last year.

Further bifurcation of the Total Vegetable oils Supply in to major oils, it is clear that the major increment in the supply is seen in Palm oil (6.1%), Rapeseed oil (6%) and soybean oil (3.2%). However the supply of coconut oil and sunflower oil is expected to shrink during 2014-15.

Please note that Palm oil and soybean oil are the two major vegetable oils jointly accounting for around 71% of the total vegetable oil supplies in the world.

Thus a joint increment in supply of soybean and palm oil reaches near 5.1% for 2014-15 as compared to 2013-14. This seems quite significant increment.

Now let us have a look at Table 3 which shows the soy oil supply scenario in the world, major importers and major producers.

1. India and china are the major importers of soy oil. So far as the India is concerned, it started its marketing season 2014-15 with increased beginning stocks (3% higher), the production also increased by 1%, imports have also seen increment of around 5% till date as compared to 2013-14. However, the domestic consumption is estimated to witness an increment of around 5%, the ending stocks are estimated to decline by around 11%.
2. China’s Soy oil production during 2014-15 is estimated to increase significantly by around 8 %, reducing the depending on imports by around 26%. However the pace of consumption increment remains at 4% as compared to 2013-14. There seems no major change in the ending stocks.
3. All the major producers of soy oil i.e. China, US, Argentina and Brazil started the Marketing Year 2014-14 with significantly low beginning stocks. The major production increment is seen in China and Argentina which helped in improving the world production by 5% resulting an increment of around 3% in total world supply.
4. The domestic soy oil consumption of US is estimated to decline by around 3% during 2014-15 however in others it is estimated to improve.
5. Despite a short fall in the ending stocks of Indian by around 11%, and Argentina by 12%, the US is estimated to be left with huge ending stocks of around 23%. The world will be having 4% higher ending stocks as compared to 2013-14.

Table 4 presents the Palm oil supply and demand scenario of its major importers as well as producers.

1. China and India, the biggest importers of palm oil,  both started Marketing year 2014-15 with significantly down beginning stocks of palm oil (china -41%, India -38%).
2. Thus considerable increment in imports of around 13% is estimated for both of these countries thus improving the supplies by around 9% for 2014-15.
3. The domestic consumption is also estimated to increase by 8 to 10 percent in these countries.
4. One the one hand, china is expected to end this season with improved ending stocks, the India may finish the season with less ending stocks as compared to 2013-14.
5. The Major Producers of Palm oil, i.e. Indonesia and Malaysia both started the year 2014-15 with ample beginning stocks from 9 to 17 percent.
6. The production is also estimated to increase considerably in Indonesia and Malaysia by 8 and 5% respectively during 2014-15 as compared to 2013-14.
7. Total world palm oil supplies are estimated to increase by around 6% resulting in to an increment of around 7% ending stocks at world level.

The supply and demand fundamentals so far has remained in favor of BEARS, however, in coming days a lot will depend up on the MONSOON situation in India. We will have to watch this year's monsoon onset and its further progress. if any deviation from its normal onset appears then Indian edible oil market can see significant upside. 

As of now not much supplies concerns are there.

Soy Oil Prices Consolidates during Week ending 6th Feb 2015 in Indian Market

Bull and Bears remained equally active during first week of February 2015. The week started with a bullish undertone, but after the initial gains for first two days, prices hovered in a narrow range thereafter for most of the time throughout the week and finally closed in Red. However, on weekly basis marginal gains were seen during this week.

NCDEX Soy oil Feb Contract
Weekly Open = 618
Weekly High = 634.95
Weekly Low = 618
Weekly Close = 627.50
Difference between Open & Close = 9.5
%age weekly gains =( 9.5/618) *100 = 1.53%

This indicates that market is getting resistance on current levels and it needs some big news to push market up from current levels.
These gains were mainly seen due to sharp rise in international crude oil prices, and improvement in the CPO prices at BMD, Malaysia.

The next week may prove deciding in finding the direction of the market for medium term.

In India summer season is just starting from March onwards and demand of crude palm oil increases as compared to soy oil.

NCDEX Soy Oil Feb Contract as on 6 Feb 2015

Soy oil market sentiments improve in Indian Market

Today Soy oil market in India traded with a bullish undertone despite the fact that yesterday sharp correction was seen.

In fact, strong international market sentiments i.e soy oil at CBOT and Crude palm oil at BMD, Malaysia added to the bullish undertone of the Indian market.

Firm international crude oil sentiments also supported the market. Despite all these positive factors market was unable to break yesterday’s high price indicating that traders are still in dilemma regarding future movement of the market.

It may take some more time to witness the clear direction of the market. Let us wait for a day or two.

Today NCDEX Soy oil Feb contract closed at 631.30 (1.25 % up from previous close).

Soy oil Market update of Indian Futures Market

As described in the earlier posts, the soy oil market seems unable to sustain on higher levels. After witnessing a price rise for the three consecutive days, today market fell due to lacklustre demand in the physical market.

The earlier rise was mainly due to short covering and support from crude oil. Today crude oil has also seen some profit booking in international market.

In Indian futures market, the NCDEX feb soy oil contract is getting strong resistance near 632 level. Today if market closes below 626 level then market may further witness weakness towards 610 level. [current price level at 9.19 IST is 624.45]

At the same time closing above 632 will make market strong.

Current market condition seems weak.

Soy oil Weekly chart : NCDEX Feb contract

Learn to earn in Long Term Trade in Commodities through Technical Analysis

Commodities Market trading is a little bit difficult as it needs reasonable knowledge of the fundamental factors of demand and supply of the commodity under trade as well as some basic knowledge of the Technical Analysis to decide the entry and exit point.

There are numerous articles and study material freely available about Fundamental and Technical Analysis.

However here we will discuss about some basic concepts of technical analysis which we have found very useful and simple.

We will learn how  to use indicators to make a "DECISION MATRIX TO IDENTIFY A RIGHT TRADE" from a Long Term Trading Perspective. 



Before we start, few points must be noted down.

1. All known information is reflected in the price.
2. Market moves on the basis of expectations and emotions of the Traders i.e (Buyers and sellers). 
3. No Single Technical indicator is right all the time.
4. You too don't have to be right all the time.
5. Practice to learn about few reliable indicators and stick to them.
6. Be consistent and disciplined in your approach. 
7. Most of the money is being made in a TREND, especially as far as futures market is concerned.
8. Patience and discipline is needed as you must wait for clear trend in the market in order to succeed on the long run.
9. As long as the indicators are in neutral territory avoid to trade unless you are a very knowledgeable trader.

Terms used in Technical analysis

What is Technical Analysis

• In simplest words, it is the examination of past price movement to forecast future price movement.
• In Technical analysis, price refers to any combination of open, high, low and close for a given commodity over a specific time frame.
• The time frame can be intraday, daily, weekly or monthly or yearly etc.

Important Types of Technical Charts

Line charts, Bar charts, Japanese Candlesticks chart

Candlesticks Chart Pattern

Line Chart Pattern

Bar Chart Pattern

Market Trend

Up trend, Down trend, Sideways trend

Moving Averages (MA)

ØThese are some of the oldest and most useful indicators.

ØBasically moving averages show TREND.

ØA BUY signal is given when price crosses above the moving average and the MA is directed upward.

ØA SELL signal is given when price drop below the MA and MA is directed downward.

ØBuy or Sell signal is not given when MA changes direction but price does not cross above or below the MA.

ØTHE MOVING AVERAGES SERVES AS SUPPORT AND RESISTANCE.

Types of Moving Averages

ØSimple Moving Average (SMA)

ØExponential Moving Average (EMA)

ØWeighted Moving Average (WMA)

Typically 5 and 10 are used in EMA in most of the agricultural commodities.

Bollinger Bands (BB)

Bollinger Bands are a kind of trading envelope. They are lines plotted at an interval around a moving average.

Period: The period for which to compute the band.(Typically 10 is used in agricultural commodities)

Band Width: The half-width of the band in terms multiples of standard deviation. Typically 2 is used.

Bollinger Bands consist of a moving average and two standard deviations charted as one line above and one line below the moving average. 

USES:

ØTo determine overbought and oversold zones.

ØTo confirm divergences between prices and indicators.

ØTo project price targets.

ØThe wider the bands are, the greater the volatility is.

ØThe narrower the bands are, the lesser the volatility is. 

Volume

ØVolume can be a barometer of future activity and direction.

ØVolume measures the number of contracts that exchanged hands during the trading session.

ØIt measures market activity and liquidity. Higher volumes means higher liquid contract or commodity and vice-versa.

ØVolume is tracked on an individual delivery month and total symbol basis. 

Open Interest (OI)

ØOpen Interest is applicable for futures and commodities charts only.

ØOpen interest shows the total number of futures contracts that have been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery.

ØWhen both sides are new, open interest increase.

ØWhen only one side is new, open interest remains unchanged.

ØWhen both sides close out, open interest decreases. 

Relative Strength Index (RSI)  ------- (Range : 70-30)

ØIt measures market's strength and weakness.

ØA high RSI, above 70, suggests an overbought or weakening bull market. A low RSI, below 30, implies an oversold market or dying bear market.

ØIt works best when a failure swing occurs between the RSI and market prices. For example, the market makes new highs after a bull market setback, but the RSI fails to exceed its previous highs.

ØWhen price touches the upper BOLLINGER BAND, and RSI is below 70, it is an indicator that trend will continue.

ØWhen Price touches the lower BOLLINGER BAND, and RSI is above 30, down trend will continue.

ØIf a price touches the upper BOLLINGER BAND and RSI is above 70, the trend may reverse and decline.

ØIf a price touches the lower BOLLINGER BAND and RSI is below 30, the trend may reverse and move upward.

Stochastic  (Slow) - (Range : 80-20)

ØIt indicates OVERSOLD & OVERBOUTH market conditions.

ØIn an upward trending market, prices tend to close near their high.

ØIn a downward trending market, prices tend to close near their low.

ØWhen an upward trend matures, prices tend to close further away from their high.

ØWhen a downward trend matures, price tend to close away from their low.

Clusters

ØThe stochastic indicator attempts to determine when price starts to cluster around their low of the day in an up trending market, and cluster around their high in a downtrend. 

Moving Average Convergence/Divergence (MACD)

ØBuy when the oscillator crosses above the slower exponential moving average of the oscillator.

ØConversely, you sell when the oscillator crosses from above to below the exponential moving average of the oscillator.

ØLastly, divergence is possible with the MACD.

ØThe ideal signal would show divergence, clearly break a dominant trend line, and display the crossing of the MACD lines.

How to use the above technical Indicators ---- Learn 

Thus, Exponential Moving Average (EMA), Bollinger Bands (BB), Relative Strength Index, Slow Stochastic and MACD are five major technical tools which we can apply in finding initiation point and exit points. Most of the time you will have a winning trade in long term. 

Free Fall continues in Indian Soy oil Market

India Soy oil Market Update:

As described Yesterday, Indian Soy oil market is falling freely towards 589 level…. May be by tomorrow.

Daily and Weekly charts are very bearish.

Physical market was also dull today with slack demand.

CBOT soy oil also seems quite weak.

Traders should manage their positions according. 

NCDEX Soy Oil Feb Contract: 9.35 PM IST trades at 607.55 Level.

NCDEX Soy Oil Feb Contract: Weekly Chart

Soy oil closes in RED in Indian Futures Market

As predicted today, Finally Indian Soy oil Futures Market closes with a bearish note tonight. The NCDEX Soy oil Feb contract close at  at 611.20 (-1.92% from previous day close). 

The weakness is likely to continue tomorrow as well.

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Technical Levels for NCDEX Soy oil Feb contract for 29.01.2015

597 then 589 are the next support and market will get resistance 615 then 622 levels.

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The soy oil at the CBOT close in RED tonight.

Soy oil prices expected to further slip in Indian Market

As predicted during past week on 21 January 2015 in this blog, the Indian soy oil futures prices fell to the level near 615 from 637 on poor demand and weak international market cues.

The situation has yet not improved. Some more correction is expected on first few days of this week. The market may further correct to the level near 605.

• The import of edible oil in India has seen increment during past two months as the Indian traders anticipated well in advance that import duty on the edible oils may be increased.
•  The major exporters of palm oil i.e. Indonesia and Malaysia successfully exported palm oil to Indian to reduce their burgeoning stocks.
• Drastic price fall in the crude oil also reduced the demand of CPO in to bio diesel.
• The pace of domestic oilseed crush was remain low due to slack export demand of oil meal.
• As per the data released by the Solvent Extractors’ Association of India, the import of Vegetable oils (edible & non-edible) for the month of November, 2014 is reported at 1,189,934 tons compared to 944,309 tons in November, 2013, consisting of 1,149,131 tons of edible oils and 40,803 tons of non-edible oils i.e. up by 26%.
• Please note that the edible oil stock position on the Port is also comfortable.
• The SEA of India data shows that the current stock of edible oils as on 1^st Dec., 2014 at various ports is estimated at 860,000 tons (CPO 555,000 tons, RBD Palmolein 80,000 tons, Degummed Soybean Oil 60,000 tons, Crude Sunflower Oil 130,000 tons and 35,000 tons of Rapeseed (Canola) Oil and about 1,100,000 tons in pipelines.
• Total stock, both at ports and in pipelines increased to 1,960,000 tons from 1,860,000 tons in Nov.’14 and 1,470,000 tons in Dec.’13.

 

Source: seaofindia.com

All these factors have significantly contributed to the current price fall in the edible oil prices in India which may continue for next couple of days during this week.