The Hindu Business Line : Palm oil may test support level

MALAYSIAN crude palm oil futures rose marginally higher on Friday on expectations of lower production and ending stocks. The Government-run Malaysian Palm Oil Board releases official June production, export and stock numbers on Monday. The two cargo surveyors of Malaysian Palm oil will also release export estimates for July 1-10 on Monday.

CPO futures dropped from their recent highs due to losses in overnight CBOT soya oil futures on forecasts for rain in the near-drought hit eastern Midwest crop region, especially in top producer Illinois.

Although CBOT soya oil futures look set to rise higher on weather and soy rust concerns, peak production coupled with shrinking exports and persistent worries of currency revaluation is expected to cap the potential for CPO prices to rise sharply higher along with soya oil.

The third month active September contract is still seen moving in a broad range.

Support will now be noticed at 1,393-95 Malaysian ringgit (MYR) levels also being the trend line support point as seen in the chart above.

CPO futures are still stuck in a range and only a break of 1,478 MYR/tonne will trigger bullishness and possible buy-stops. This level also has another important technical significance.

An inverse head and shoulder pattern is in the making with the 1,475-78 MYR as the neck-line point seen in the chart above.

This is an extremely bullish pattern targeting 1,700 MYR/tonne. As long as 1365 MYR/tonne holds the downside, expect CPO futures to rise higher towards 1,535 MYR initially followed by the next important psychological resistance at 1,600 MYR/tonne.

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.

The correction 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 strong third wave is to begin anytime soon.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line in the indicator suggesting bullishness.

Only a crossover of the averages below the zero line now will signal a bearish reversal.

Prices are below the short-term 8 period EMA at 1,419 MYR and the 34-day period EMA is at 1,412 MYR/tonne.

Therefore, look for prices to test the support levels and rise higher subsequently.

Supports at 1,408, 1,395 and 1,385 MYR. Resistances at 1,423, 1,455 and 1,478 MYR.

(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.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Palm oil may test support level

Gold loses lustre; silver shines

Groundnut oil up on scattered buying

Tax on cash transaction, fringe benefits seen hitting agri co-ops