The Hindu Business Line : Palm oil may consolidate, rise

MALAYSIAN crude palm oil futures ended marginally higher on Friday due to lack of fresh leads. However, market participants weren't concerned over the steep decline, as the slowdown was mostly due to the recent long holidays and exports would soon pick up again. A key soya supply/demand report issued by the US Department of Agriculture in the week also had no influence on palm oil prices. The USDA raised its 2005-06, soyabean output by 76 million bushels to 3.043 billion bushels. It also revised its soya oil output projection to 19.453 billion pounds from 19.155 billion pounds forecast in October. Negative factors being discounted by the markets, is a possible sign of a bullish trend to begin.

The third month active front month contract is moving in a narrow range. Prices are moving in a range between 1,420-1,445 Malaysian ringgit (MYR) a tonne levels presently. Only a move below 1,393 MYR/tonne will cast doubts on our overall bullish outlook, which we continue to favour in spite of the recent fall in prices.

One dip lower towards 1,408-10 MYR/tonne cannot be ruled out or even lower below 1,400 MYR/tonne from where futures can rise higher again. Important resistances past 1,445 MYR/tonne will be at 1,457 and 1,478 MYR/tonne respectively.

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 ending at 1329 MYR/tonne.

The third wave seems to have begun looking to target the 1,600 MYR/tonne levels ultimately. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have been moving above and below the zero line in the indicator suggesting indecisiveness in the trend presently.

Prices are above the short-term 8 period EMA at 1,432 MYR/tonne and the 34 period EMA is at 1,433 MYR/tonne. Therefore, look for palm oil futures to consolidate and rise higher.

Supports are at 1421, 1408 and 1393 ringgits. Resistances at 1445, 1458 and 1478 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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