The Hindu Business Line : Palm oil futures may rise

MALAYSIAN crude palm oil futures on BMD ended sharply higher on Friday on expectations of stronger exports for the period February 1-20. Exports data for that period is due on Monday. Societe Generale de Surveillance, a leading surveyor of Malaysian palm oil cargoes, had estimated exports for February 1 to 15 at 5,44,861 tons, up 12.6 per cent from a month ago.

Soya oil futures on the Chicago Board of Trade closed higher on Thursday, supported by a rally in soyabean to a near two-month high on renewed worries that dry weather in parts of South America was cutting yields. Earlier in the week, the Malaysian Palm Oil Board said palm oil output fell 12.3 per cent in January from December, while stocks to be carried forward to this month rose by only 1.76 per cent, falling in line with market expectations.

The third month active May contract rallied higher and looks set to test the next resistance at 1,353 Malaysian ringgit (MYR) a tonne. Important resistance is at 1,380 MYR/tonne being the falling trend line resistance point. 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.

As mentioned earlier, daily close above 1,321 MYR/tonne has the potential to take CPO futures to 1,353 MYR/tonne initially or even higher towards 1,389 MYR/tonne the falling trend line resistance point as seen in the chart above. The weekly charts still continue to show signs of reversals as the positive divergence is very strong. Therefore, it is better to be cautiously bearish from hereon.

The move to 2003 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. Wave "C" then possibly ended at 1,252 MYR/tonne.

RSI, is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line in the indicator suggesting bearishness. Current prices are higher than the short-term 8-day EMA at 1,313 MYR/tonne and the 30-day EMA is now at 1,322 MYR/tonne. Look for prices to head higher and test the resistance levels. Supports at MYR 1,285, MYR 1,252 and MYR 1,233. Resistances at MYR 1,353, MYR 1 380 and MYR 1,400.

(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)

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