The Hindu Business Line : Palm oil futures may rise

MALAYSIAN crude palm oil futures ended the year on a firmer note Friday with some support from CBOT soya oil futures. The third month active front month contract moved higher in line with our expectations.

Near-term resistance is at 1,445 Malaysian ringgit (MYR) a tonne, and 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 months and target the trend line resistance level at 1,490 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 1252 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 or even higher. 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 on the verge of going above the zero line in the indicator suggesting a bullish reversal in the offing.

Prices are above the short-term 8-day period EMA at 1,412 MYR/tonne and the 34-day period EMA is at 1,413 MYR/tonne. Therefore, look for palm oil futures to rise higher. Supports MYR 1,408, 1,397 and 1,385. Resistances at 1,435, 1,447 and 1,478.

(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.)