The Hindu Business Line : Palm oil futures may rise

MALAYSIAN crude palm oil futures ended higher on Friday ahead of a long holiday, inching higher slowly and steadily waiting for fresh clues and triggers for future direction.

The third month active front month contract edged higher towards near-term resistance levels. We see an inverse-head-and-shoulder pattern in the making with the neckline at 1,447-50 Malaysian ringgit (MYR) a tonne levels. A daily close above this level should see prices targeting the trend line resistance at 1,491 MYR/tonne or even higher towards 1,523 MYR/tonne.

An unexpected move below 1,408-10 MYR/tonne can cast doubts on this bullish view. We have been favouring a rise in CPO futures in thee coming months, as long as 1,375 MYR/tonne holds any attempts of declines. 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.

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. We can now expect the explosive third wave to begin. Unexpected break below 1355 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 above the short-term 8-day period EMA at 1436 MYR/tonne and the 34-day period EMA is at 1,425 MYR/tonne. Therefore, look for palm oil futures to rise higher.

Supports MYR 1,425, 1,410 and 1395. Resistances at MYR 1,455, 1,478 and 1491.

(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.)