The Hindu Business Line : Palm oil may head higher

MALAYSIAN crude palm oil futures ended higher on Friday on expectations of lower production following heavy rains in the growing areas of north and east.

Most of the negative factors have been discounted.

The third month active front month contract turned higher and is showing positive signs of rising higher again. The first being the break of the key 200-day EMA level and the falling trend line resistance point at 1409 Malaysian ringgit (MYR) a tonne. Once the top at 1,447 MYR/tonne has been taken out, prices should get into the bullish mode again. Crucial support now lies at the long-term trend line point at 1,385-86 MYR/tonne levels and a daily close below this level will be bearish again. We will stick with our favoured view of a rise higher past 1,447 MYR/tonne in the coming weeks.

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. Unexpected break below 1,355 MYR/tonne will force us to abandon this count.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line in the indicator suggesting bearishness. Prices are above the short-term 8-day period EMA at 1,408 MYR/tonne and the 34-day period EMA is at 1,411 MYR/tonne. Therefore look for palm oil futures to head higher.

Supports are at MYR 1,391, 1,385 and 1,360. Resistances at MYR 1,435, 1,447 and 1478.

(The author is associated with the Multi Commodity Exchange of India Ltd. The views expressed in this column are his own and not that of 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.)