The Hindu Business Line : Palm oil futures may dip

MALAYSIAN crude palm oil futures on MDEX ended lower on Friday on concerns relating to swelling physical stocks and falling values in rival Chicago soya oil prices. Markets will now focus on exports data due on Monday for the period June 1-20.

Societe Generale de Surveillance, the market's main cargo surveyor, put Malaysian palm oil exports for June 1-15 at 492,546 tonnes, up from the 479,152 tonnes shipped in May l-15. It had earlier put exports for the first 10 days of June at 268,230 tonnes, down sharply compared to 334,522 tonnes in May 1-10 and raising fears of a significant shortfall in demand.

In spite of a bullish report from the Hamburg based newsletter Oil World, there was no recovery seen in CPO contracts. The official Malaysian Palm Oil Board said on Monday, Malaysia's palm oil stocks stood at 1.04 million tonnes at end-May, up 4.1 per cent from 1.0 million tonnes at end-April.

The third month active contract is increasingly pointing towards a fall from here. Currently the long-term trend line between 1460 to 1475 Malaysian ringgit (MYR) a tonne seems to providing some cushion. A daily close below these levels will set the tone for the test of 1350 MYR/tonne, an important Fibonacci retracement point followed by another important target at 1230 MYR/tonne. However, minor corrective up moves are possible before we see a fall from here.

We have been adopting a bearish outlook as the weekly charts turned bearish at 1930 MYR/tonne levels based on divergences in indicators, moving average cross-over and elliot wave structures. The move to 2003 MYR/tonne is the end of the fifth wave impulse and a move from there is a corrective A-B-C pattern in the making. We could still be in an extended wave "A" looking to target 1350 MYR/tonne.

However, RSI is heavily oversold and possibility of a good up ward correction is still there. There is no divergence seen which leads us to believe that this bearish trend is not completely over. The averages in MACD, continues to be below the zero line in the indicator suggesting bearishness.

Current prices are lower than the short-term 8-day EMA at 1498 MYR/tonne and the 34-day EMA is now at 1613 MYR/tonne. Look for prices to consolidate and head lower. Supports, at, 1460 , 1450 and 1410 ringgits. Resistances, at 1495, 1525 and 1550 ringgits.

(The author is associated with the Multi Commodity Exchange of India (MCX). The views expressed in this column are his own and not that of his employer. This analysis is based on the historical price movements and there is risk of loss in trading.)

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