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Gnanasekar. T

MALAYSIAN crude palm oil futures ended higher on Friday on expectations of reduction in import duties of edible oils.

CPO futures held well during the week despite MPOB's estimates for a higher output in month of August.

Export demand for palm is also seen strong in the coming months ahead of the festival seasons in India, Pakistan and West Asia. Estimates of better exports in the first half of September also aided sentiment.

The third month active front month contract moved in line with our expectations. Immediate resistance is at 1,408-10 Malaysian ringgit (MYR) a tonne levels being the trend channel resistance point and also happens to be the important 200-day EMA level.

Only a daily close above the fractal top of 1,448 MYR/tonne will be seen as a sign of resumption in the bullish trend. This move could once again bring in to discussion the inverse head and shoulder pattern we identified few months back.

CPO futures should get well supported at 1,378-80 MYR/tonne levels now. As long as 1,353 MYR/tonne holds the downside, expect CPO futures to rise higher.

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. A strong third wave is to begin anytime soon.

RSI is in the neutral zone now also displaying a positive divergence another reason for last week's pullback.

The averages in MACD have gone above the zero line in the indicator suggesting a bullish reversal.

Prices are above the short-term 8-day period EMA at 1,385 and the 34-day period EMA is at 1,382 MYR/tonne. Therefore, look for palm oil futures to head higher.

Supports are at MYR 1,385, 1,365 and 1,353. Resistances at MYR 1,408, 1,423 and 1,445.

(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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