The Hindu Business Line : Palm oil to test support levels

MALAYSIAN crude palm oil futures ended firmer on Friday due to weekend short-covering, but the prospects of poor exports and a firm Malaysian currency capped any sustained gains.

The third month active front month contract is finding support near the 1,410 Malaysian ringgit (MYR) a tonne levels. As mentioned in the previous update, crucial support now lies near the 1,408-10 levels and a daily close below 1,408 MYR/tonne can cast doubts on the strength of the bullishness and test the trend line support point at 1,395-98 MYR/tonne levels 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 or even higher, as long as 1,375 MYR/tonne holds any attempts of declines.

The move to 2003 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. 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. 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 above the zero line in the indicator suggesting a bullish reversal.

Prices are below the short-term 8-day period EMA at 1,421 MYR/tonne indicating near term bearishness and the 34-day period EMA is at 1,415 MYR/tonne. Therefore, look for palm oil futures to test the support levels in the coming sessions.

Supports are at 1,408, 1,395 & 1,382 ringgits. Resistances at 1,423, 1,434 & 1,455 ringgits.

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