Top pick for the day - Malaysia’s Plantation index

Is the next leg up underway?

Bursa Malaysia Plantation Index (Plantation) has fallen from the 7,729 November high but it appears to be turning around right now.

The movement of the Crude Palm Oil (CPO) prices is closely related to the performance of the index as higher commodity prices would likely translate to higher revenue and higher earnings, assuming that other variables remain the same.

That is why both CPO and Plantation have been moving together since the August low.

The current weakness in Plantation could be at the tail end (if not already ended) as prices rebounded strongly off its ST channel support and also the 38%FR.

With CPO breaking out above the LT resistance trend line (right chart) recently, it could signal that Plantation may soon follow suit by breaking out of its bullish flag pattern.

Only a move above 7,491 would confirm that the next leg up is underway.

The upside targets could potentially be 7,729 and 8,175, where the latter is its 138%FR.

A drop below 7,289 would see further weakness.

Therefore, we think Plantation could be the next sector to look at. Watch out for the key levels of 7,289 and 7,491 in the coming days. (Read Report)

Source : CIMB Research