The Hindu Business Line : Palm oil may head higher

MALAYSIAN crude palm oil futures on BMD ended sharply higher supported by robust increase in exports and gains in the overnight CBOT soya oil futures.

SGS, a leading surveyor of Malaysian palm oil products exports, estimated on Friday shipments for March 1-25 stood at 9,24,212 tonnes, up 8.3 per cent from the 8,53,759 tonnes it estimated for the same period last month.

The official MPOB issues March production, exports and closing stocks data on April 10, which will be watched closely by market participants.

Favourable weather and no public holidays in March are expected to see an increase in production levels.

Palm oil futures have been rising in the past one month, reflecting a rally in the US soyabean futures fuelled by worries that dryness is cutting the Brazilian bean crop and the rapid spreading of rust disease in both the US and South America.

The third month active June contract tested the support levels and rose higher as per our expectations.

Important resistance is at 1,478 Malaysian ringgit (MYR) a tonne and a daily close above this level should set the trend higher towards 1,535 MYR/tonne levels.

Though it is too early to call for bullish rally, price structures are looking strong and believe we could be targeting 1,600 MYR/tonne levels soon.

Prices have again closed above the 200-day EMA an indication of bullishness. Initial support is at 1,420 MYR/tonne being the channel support point and as long as 1,377-80 MYR/tonne holds the downside, we can now expect CPO futures to head higher again.

It is important for prices to hold support at 1,377-80 also being the fibonnaci retracement level.

We have been tracking a bullish reversal right from 1,250 MYR/tonne levels as the weekly charts have been showing signs of strong positive divergences.

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 1368 MYR/tonne followed by a flat Wave "B" which then hit 1566 MYR/tonne. Wave "C" then possibly ended at 1,252 MYR/tonne.

We are possibly in a new impulse with the first wave of the impulse ending at 1,504 MYR/tonne and the second wave possibly ending at 1,395 MYR/tonne.

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 1,427 MYR/tonne and the 34-day EMA is now at 1,397 MYR/tonne.

Look for prices to rise higher.

Supports are at 1420, 1395 and 1377 ringgits. Resistances at, 1459, 1478 and 1500 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.)

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