The Hindu Business Line : Palm oil may test support levels

MALAYSIAN crude palm oil futures on BMD fell lower weighed down by a fall in the values of overnight CBOT soya oil futures on thin volumes, ahead a data filled week.

On Monday, the official Malaysian Palm Oil Board is due to release production, exports and closing stock figures of palm oil for March, while cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will issue palm oil export estimates for the first 10 days of April, which will be watched closely by market participants.

A decrease in the palm oil stocks for end-March is expected compared to the previous month and the report on April 10 will be crucial one for near-term direction. Favourable weather and no public holidays in March are expected to see an increase in production levels.

The third month active June contract was struggling to get any momentum on the upside and was capped at 1,450 Malaysian ringgit (MYR) a tonne. Only a daily close above 1,478 MYR/tonne should set the trend higher towards 1,535 MYR/tonne levels. As mentioned earlier, one more test of 1400 MYR/tonne or lower looks likely, and as long as 1,375-80 MYR/tonne holds the downside, we can expect CPO futures to rise higher again and test the important resistance at 1,535 MYR/tonne. It is important for prices to hold support at 1,375-80 MYR/tonne also being the fibonnaci retracement level and a wave equality target.

Favoured view is to look for prices to go below 1,400 MY/tonne and then recover from there towards 1,500 MYR/tonne levels. 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 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 are possibly in a new impulse with the first wave of the impulse ending at 1,504 MYR/tonne and the second wave in progress in a triangle pattern. 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 1,436 MYR/tonne and the 34-day EMA is now at 1,416 MYR/tonne. Look for prices to test the support levels. Supports, 1409, 1395 and 1377 ringgits. Resistances at, 1435, 1450 and 1478 ringgits.

(The author is associated with The Multi Commodity Exchange of India Ltd (MCX). 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
NFCL Kakinada plant posts record urea output

Palm oil may test support levels

Free movement of agricultural products — 16 States to amend APMC Act