The Hindu Business Line : Palm oil futures may rise

CBOT soya oil futures have been moving in a choppy range as weather concerns dominate other fundamental factors. Higher production is expected to cap any up side rallies on the back strength in CBOT soya oil. An appreciating ringgit will make palm oil sold in dollars more expensive for overseas buyers. However, the main overseas buyer India is also expected to follow suit and let the local currency appreciate, which will make imports cheaper and, therefore, neutralise demand worries.

Supply demand mismatch is expected where production might overtake demand as the palm crop gets into peak production in the producing countries. The third month active August contract moved against expectations. Prices could not follow-through higher after a break of the trend line resistance point and a weekly close below 1,400 Malaysian ringgit (MYR) a tonne has again opened the downside potential to 1,350/60 MYR/tonne in the near-term. Markets are moving in a choppy range without any clear direction.

Despite this, looking at the price structures, believe as long as 1,350-60 MYR/tonne holds the downside, a gradual rise towards 1,434 MYR/tonne can be expected also being the 200-day EMA level or even higher towards 1,478 MYR/tonne. Only a daily close below 1,338 MYR/tonne will confirm the beginning of a bearish trend.

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 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. A break below 1,338 MYR/tonne will force us to abandon this wave count and take a fresh view again. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line in the indicator suggesting bearishness. Only a crossover of the averages above the zero line now will signal a bullish reversal. Look for prices to test the support levels and then rise higher. Supports are at 1,380, 1,360 and 1,345 ringgits. Resistances at 1408 1434 and 1455 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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Palm oil futures may rise