Wool futures prices ease

Press, 12 May 1984, Page 24

Wool futures prices ease

Trading in the wool futures market began quietly this week, prices easing 2c on the previous week’s closing quotes in the first session, Mr Peter Marshall, of the Christchurch merchant, John Marshall and Company, Ltd, said yesterday. On Tuesday, prices eased a further 2c, with little enthusiasm shown by either buyers or sellers. Expectations for a firm wool sale at Christchurch yesterday did little to affect futures prices, Mr Marshall said. “On Friday when the wool sale opened 2 per cent dearer, this reflected immediately on the futures market as prices rose 3c in the morning session in most months. “We cannot foresee any significant changes to the present trading trend as fundamentally, the supply of any great quantity of good-style fleece wool is steadily diminishing as each sale goes by and with overseas demand still present the market may continue to trade in the 15c range that has been shown on the graphs.” Mr Peter Corban, of Jordan, Sandman, Smythe, of Auckland, said that in the absence of any major change in the fundamental outlook of wool this week, futures traded as expected, in a very technical manner, falling from the resistance level, 480, basis May ’B5 contract. Buying support came as expected in the low 4705, and futures firmed on Thursday and Friday to finish the week at 475. With no real new demand or supply factors entering the market, speculators’ attention was focusing on technical analysis, the study of price movements and relationships, Mr Corban said. In the price charts, Mr Corban said, the May ’B5 contract had formed an ascending triangle. Put simply, the price had twice risen to 480, and fallen. The three low points in between these highs had each time got progressively higher. This was something of a bullish indicator, but confident buying could only be recom-

mended over 480. Any fall below 472 could well lead to further drops to around the 465 level. With yesterday’s Christchurch sale coming in the firmest in the last two months the season looked set to close on a good note. But two weak sale centres next week could cause the bulls in the market to tread cautiously, Mr Corban said. Mr Geoff McDonnell, futures manager of Mair and Company, Christchurch, said investors who followed the maxim of “don’t follow the crowd” this week would have gained between $45 and $9O per contract by going short on Monday and closing out on Wednesday afternoon. This would have meant a return of 10 to 15 per cent on their outlay over three days. Those who had opened long positions last Friday would nave been tested by the drop, wondering if margins would be called, and would have been reassured by the recovery in prices this Friday. Generally futures traders showed some uncertainty at the start of the week, different rumours circulating in the trade about the amount of stock purchased by the Chinese recently and whether there would be full rosters of wool at the forthcoming auctions, Mr McDonnell said. This uncertainty was confirmed by a large number of options being traded in the middle of the week as well as the low volume of trading. The wool sale of yesterday, with prices about 2.5 per cent up on the previous Friday’s Wellington sale confirmed the thought that futures prices during the week did not follow the physical fundamentals. “In addition, this could signify to overseas customers that New Zealand trade houses may not be keen on dropping prices to secure export orders, as the price buying stock may not be in the exporter’s favour,” Mr McDonnell said. “Accordingly, if this trend at auction remains we could look forward to some exciting activity on the futures market.”