The Hindu Business Line : Palm oil may test support levels

MALAYSIAN crude palm oil futures ended lower on Friday on profit-taking and position adjustment ahead of next week's crop and exports data due on Monday. CPO futures were also dampened by losses in the overnight CBOT soya oil futures.

September production, exports and closing stock numbers, are due from the official Malaysian Palm Oil Board on Monday. Two cargo surveyors watched by the market would also issue export estimates for October 1-10 on Monday. Markets are expecting a rise in stocks of crude and refined palm oil in the world's largest producing country in September compared to the end-August figures.

The third month active front month contract moved in line with our expectations. Trend line support will be seen at 1,445-48 Malaysian ringgit (MYR) tonne from where prices are expected to find support and rise higher again. As expected prices tested the initial resistance at 1,478 MYR/tonne, but is yet to cross the psychological resistance at 1,500 MYR/tonne.

As illustrated earlier, an inverse head and shoulder pattern is in the making and the neckline has also been broken at 1,448 MYR/tonne further enhancing our bullish view. As long as 1,416 MYR/tonne holds the downside, expect CPO futures to rise higher and test the Fibo retracement target at 1,543-45 MYR/tonne levels in the coming months.

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. The third wave seems to have begun looking to target the 1,600 MYR/tonne levels ultimately.

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

Prices are above the short-term 8-day period EMA at 1,462 MYR/tonne and the 34-day period EMA is at 1,423 MYR/tonne. Therefore, look for palm oil futures to test the support levels and rise higher again.

Supports are at 1,458, 1,445 and 1,423 ringgits. Resistances at 1,478, 1,495 and 1,504 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 his employer. This analysis is based on the 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
Rubber prices flare up further

Accounting for farms

Palm oil may test support levels