The Hindu Business Line : Palm oil futures may rise

MALAYSIAN crude palm oil futures on BMD ended marginally lower with minor losses pressured by weakness in overnight CBOT soya oil futures. Volumes were thin due to the absence of market participants attending the annual palm oil outlook conference in Kuala Lumpur.

The third month active May contract rallied higher and found good resistance above the psychological 1,400 Malaysian ringgit (MYR) a tonne levels. A weekly close below 1,400 MYR/tonne does not augur well for the sustenance of the current bull trend. Support is currently seen at 1,380 MYR/tonne level being the falling trend line support point.

Any corrective decline to 1,350 MYR/tonne is expected to hold the downside for the short-term. Potential upside targets are 1,421 MYR/tonne and 1,455 MYR/tonne. Only a daily close below 1,321 MYR/tonne will negate our overall bullish view.

The weekly charts have been showing signs of reversals, as the positive divergence look strong. 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. Wave "C" then possibly ended at 1,252 MYR/tonne. We could have begun a new impulse and a move above 1,459 MYR/tonne will confirm this eventuality.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD, are above the zero line in the indicator suggesting a bullish reversal. Current prices are higher than the short-term 8-day EMA at 1,380 MYR/tonne and the 34-day EMA is now at 1,346 MYR/tonne.

Look for prices to correct lower and then rise again. Supports at MYR 1,380, 1,368 and 1,354. Resistances at MYR 1,395, 1,421 and 1,455.

(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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