The Hindu Business Line : Palm oil may test support level

MALAYSIAN crude palm oil futures on BMD ended lower on Friday due to a sharp drop in the values of overnight CBOT soya oil futures. Markets are also cautious ahead of the holidays in the coming week. The market will be closed for three days from February 9 to mark the Chinese New Year and a Muslim religious holiday.

State-run Malaysian Palm Oil Board said it would release on February 15 official crop and trade data for January, giving clues on the demand/supply situation. Production has been better than expected in recent months and may continue to outperform expectations this month, which means stocks may still stay at a high level by end-January.

The third month active April contract headed lower and has found some intermediate support at 1,250 Malaysian ringgits (MYR) tonne levels. Crucial support is at 1,233 MYR/tonne made on August 2003, from where the rally to 2,003 MYR/tonne began as seen in the chart above.

Though there is a possibility to test this level or even lower at 1,195 MYR/tonne, being the 61.8 per cent Fibonnaci retracement levels for the move from 683-2,003 MYR/tonne, favoured view is to look for signs of bullish reversal between 1,233-1,254 MYR/tonne.

The weekly charts still continue to show signs of reversals, as the positive divergence is very strong. Also, indicators are in oversold territories and showing positive divergences. Therefore, it is better to be cautiously bearish from hereon. 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.

Wave "A" ended at 1,368 MYR/tonne followed by a flat Wave "B" which then hit 1,566 MYR/tonne. We could now be in wave "C" targeting lower levels. RSI is in the oversold zone indicating a correction to take place. The averages in MACD are still below the zero line in the indicator suggesting bearishness.

Current prices are lower than the short-term 8-day EMA at 1278 MYR/tonne and the 34-day EMA is now at 1,326 MYR/tonne. Look for prices to test the support levels and then rise higher. Supports at 1,254, 1,233 and 1,200 ringgits. Resistances at 1,274, 1,305 and 1,321 ringgits.

(The author is associated with the Multi Commodity Exchange of India Ltd. 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.)

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

Stories in this Section
Palm oil may test support level

Centre's condition to States: `Changes in APMC laws must to avail horticulture mission benefits'

Farmers' co-ops mooted for food processing sector