Olam

This is a post on Olam at the request of Lucy!

From a sentiment point of view, oil and commodities took a hit today after GoldenAgri announced the possibility of a rights issue. GA was sold down like crazy after lunch and the rest followed suit. Wilmar might have ended in the green though but IndoAgri, StraitsAsia etc, all took a hit. That includes Noble and Olam too. Basically it was nearly a sector wide sell-down.

I have long positions on Noble and Olam and yes I aint very happy bout it either.. grrr

So let’s take a look at Olam. Technicals have been weak for a while. There are bearish divergences (this is present in many counters, including the Dow Jones index) where prices head north, but indicators are flat or heading down, implying a weakening strength and on the MFI, money isn’t pouring in like it should. It does suggest more of short covering than a real inflow of funds into the market to be the cause of the recent rally. Olam’s price drop is not a bull flag and in fact can be quite bearish. I too made the mistake of going long too early as there is a lot of room for a price correction. My personal cut loss is 1.70 which is a support zone, and a 38.2% retracement support.  A break of that should see 1.60 and 1.55 as strong support.  For the stock to remain bullish it should bounce up from 1.70 to form a higher low. A break below is not bullish at all, so I have 3 reasons to cut Olam if it breaks 1.70. I actually entered long at 1.82 or so I think which now proved to be a bad move.

On the weekly chart is why I took a position on it. No bearish divergences and from the technicals 1.70 should technically hold. So I would say look out for 1.70. A bounce off it retains a bullish chart formation. If it breaks, then one has to watch out.