The Hindu Business Line : Palm oil futures may consolidate

MALAYSIAN crude palm oil futures ended marginally lower on Friday due to lack of fresh leads. Palm oil prices have been soft most of this week after volatile swings in the US soya oil and the weak performance of exports following long holidays in early November.

Despite prevailing negative factors in the markets, palm oil futures have managed to stay above the psychological 1,400 Malaysian ringgit (MYR) a tonne level and continues to trade in a narrow range waiting for a trigger to rise higher.

The third month active front month contract is moving in an even narrower range compared to last week. Prices are moving in a range between 1,409-1,441 MYR/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.

Crucial support now lies at 1,421 MYR/tonne being the short-term trend line support point and the 200-day EMA level followed by the long-term trend line support point at 1,374 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 ending at 1,329 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-day period EMA at 1,432 MYR/tonne and the 34-day period EMA is at 1,431 MYR/tonne. Therefore, look for palm oil futures to consolidate and test the support levels. Supports are 1,421, 1,408 and 1,393 ringgits. Resistances at 1,445, 1,458 and 1,478 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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