Golden Agriculture: A choppy journey

My blog is pretty new but if you have been following my writings for at least the last week or so, you would know that I'm big on Golden Agriculture. In a post on Christmas Day, I wrote about three portfolios and three counters. One of the counters is Golden Agriculture which I called a cyclical counter as it is most sensitive of the three (the other two being Healthway Medical, a growth counter, and Saizen REIT, a yield counter) to economic cycles.

In that post, I said, "Currently at 49c. This is the second largest crude palm oil (CPO) producer in the region. It is heavily levered to the price of CPO compared to Wilmar which has a greater percentage of income from downstream activities. Whether we look at PE, ROA, ROE or Gross Margin, Golden Agriculture looks better than Wilmar. With the improving global economy, the demand for CPO has increased. With the rising price of crude oil, there will be a further increase in demand for CPO as an important source of biofuel. The journey up will be choppy which makes this a perfect counter for trading."Three portfolios and three counters: future gains and passive income

If anyone who were not vested before had taken a position in Golden Agriculture then and sold in the last few sessions at resistance levels on the way up, say at 54c and 62c, he would have made a handsome profit. I know it reached a high of 65.5c but few would have been able to time it that well.

From my earlier chart reading, I said we might soon have a golden opportunity to load up on Golden Agriculture again with a correction in price as true to expectations, the ride is choppy.Golden Agriculture: A golden opportunity.

Crude oil has been trading lower and is down at US$79.13 as of now. Crude palm oil (CPO) has been down for a few sessions now, closing at RM2,510 in the last session, down 1.8%. There is concern that rising production and lower exports may drive stock levels to a new record high. Apparently, America is having a good harvest of soybeans as well which will help put a lid on the price of CPO as a greater availability of soyoil will dampen the demand for CPO.

With such negative newsflow and as Golden Agriculture is the most levered to the price of CPO amongst all the CPO companies listed in Singapore, it will bear the brunt of lowered expectations. With a bearish chart to boot, I would be surprised if Golden Agriculture does not test those support levels identified in my earlier posts.