The Hindu Business Line : Palm oil may test support levels

MALAYSIAN crude palm oil futures on BMD ended firmer on Friday after falling lower throughout the week. This was mainly due to uninspiring exports data from the leading cargo surveyor SGS.

Once again exports data remain the focus with most of the volatility this week attributed to it. And a sharp fall in CBOT soya oil futures also pressured prices.

Societe Generale de Surveillance (SGS) put export of Malaysian oil palm products for the current month at 1,095,099 tonnes, down 10.8 per cent from the 1,227,363 tonnes it estimated for October.

Markets are expected to remain in a tight range until the release of private forecaster Mr Ivan Wong's latest supply/demand outlook on December 7.

His earlier estimates were seen as neutral to bullish by market participants. He last Monday put production for the month at 1.195-1.2 million tonnes against official 1.36 million tonnes in October.

He also estimated end-November stocks at 1.35-36 million tonnes little changed from the official 1.36 million tonnes in October.

The third month active February contract fell sharply lower against our expectations. Important level to watch in the coming week will be 1395 Malaysian ringgit (MYR) a tonne and as long as this level holds we can still expect prices to extend higher.

Failure to surpass the important resistance at 1,480 MYR/tonne has forced us to abandon our short-term bullish outlook. The weekly charts still continue to show signs of reversals though there is downward pressure in the short-term.

Therefore, we believe there is potential for CPO futures to head higher after this down move. Our bullish view would go wrong on a daily close below 1,370 MYR/tonne.

The move to 2,003 MYR/tonne is the end of the fifth wave impulse and a move lower from there is a corrective A-B-C pattern in the making.

We now believe wave "B" ended at 1,478 MYR/tonne. As wave "A" is an impulse the first wave of "A" ended at 1,785 MYR/tonne followed by the second wave of "A" at 1,950 MYR/tonne and the third wave of "A" ended at 1,368 MYR/tonne.

The fourth wave of "A" then went higher to 1,566 MYR/tonne and the fifth wave of "A" got over at 1,353 MYR/tonne levels. We could now be in wave "C" targeting lower levels.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. It is also showing a positive divergence. The averages in MACD, have gone below the zero line in the indicator suggesting bearishness.

Current prices are lower than the short-term 8-day EMA at 1,426 MYR/tonne and the 34-day EMA is now at 1,431 MYR/tonne.

Look for prices to test the support levels. Supports at 1,410, 1,395 and 1,370 ringgits. Resistances at 1,435, 1,454 and 1,480 ringgits.

(The author is associated with The Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not necessarily that of his employer. This analysis is based on historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

More Stories on : Technical Analysis | Oilseeds & Edible Oil

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Palm oil may test support levels