The Hindu Business Line : Palm oil may consolidate

MALAYSIAN crude palm oil futures on BMD ended marginally lower on Friday in thin trading ahead of a long weekend and lack of any fresh market moving leads. Sentiment was also cautious ahead of April palm oil export estimates on Tuesday due to be issued by renowned cargo surveyor SGS (Malaysia) Bhd.

Talks of possible revaluation of the Chinese currency Yuan is also seen pressuring CPO prices. The third month active July contract broke out of the triangle pattern but the important resistance at 1,445-50 Malaysian rinngits (MYR) a tonne levels still remains an important near-term barrier to cross. Only a daily close above 1,478 MYR/tonne should set the trend higher towards 1,535 MYR/tonne levels. Intermediate support is seen at 1,423-25 MYR/tonne levels and an unexpected break here can target the next important support at 1,410 MYR/tonne.

Still our favoured view is to look for prices to head higher towards 1,535 MYR/tonne levels in the medium-term. 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 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/tone 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 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 1435 MYR/tonne and the 34-day EMA is now at 1,425 MYR/tonne. Look for prices to consolidate test the support levels and rise higher again.Supports MYR 1421, 1409 and 1385. Resistances at MYR 1455, 1478 and 1535.

(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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