The Hindu Business Line : Palm oil may rise higher

MALAYSIAN crude palm oil futures on BMD fell lower towards the close of the week weighed down by a fall in the values of overnight CBOT soya oil futures. News that India had amended base import prices for crude palm oil had minimal impact on CPO futures as the disadvantage to soya oil was interpreted to be minimal.

Societe Generale de Surveillance, a leading surveyor of Malaysian oil palm cargoes, said on Thursday exports for March stood at 1,220,445 tonnes, up 32 per cent from 926,959 tonnes seen for February.

The official MPOB issues March production, exports and closing stocks data on April 10, which will be watched closely by market participants. Favorable weather and no public holidays in March are expected to see an increase in production levels.

The third month active June contract failed to surpass the important near-term resistance at 1478 Malaysian ringgit/tonne. Further a daily close below the psychological 1450 MYR/tonne has added some uncertainty on the potential to head higher from here straight away.

Only a daily close above 1478 MYr/tonne should set the trend higher towards 1535 MYR/tonne levels.

One more test of 1400 MYR/tonne or lower looks likely, and as long as 1375-80 MYR/tonne holds the downside, we can expect CPO futures to rise higher again and test the important resistance at 1535 MYR/tonne.

It is important for prices to hold support at 1375-80 MYR/tonne also being the fibonnaci retracement level and a wave equality target. Initial support is at 1420 MYR/tonne.

We have been tracking a bullish reversal right from 1250 MYR/tonne levels as the weekly charts have been showing signs of strong positive divergences.

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 1368 MYR/tonne followed by a flat Wave "B" which then hit 1566 MYR/tonne. Wave "C" then possibly ended at 1252 MYR/tonne.

We are possibly in a new impulse with the first wave of the impulse ending at 1504 MYR/tonne and the second wave possibly ending at 1395 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 lower than the short-term 8-day EMA at 1441 MYR/tonne and the 34-day EMA is now at 1410 MYR/tonne. Look for prices to test the support levels and then rise higher again.

Supports are at 1424, 1395 & 1377 ringgits. Resistances at, 1445, 1478 & 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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