The Hindu Business Line : Palm oil futures may consolidate

Malaysian crude palm oil futures ended higher Friday on bullish outlooks provided in the recently concluded " Palm Oil Price Outlook Conference" in Kuala Lumpur. Despite the bullishness, futures failed to cross the psychological resistance at 1,500 Malaysian ringgits (MYR) a tonne. A rebound in soya oil futures of CBOT is also another positive factor.

Instead prices fell for four straight sessions during the week. The Malaysian Commodities Minister Peter Chin, opening the conference on Thursday, said local palm oil prices were likely to rise as production in the first half of 2006 would be lower than in the same period of 2005, reducing stock levels.

Weather concerns in South America, abolition of tariff rate quotas by China and the exciting prospects of more palm oil demand triggered by global demand for bio-diesel should underpin prices in the coming months. The third month active front month contract moved higher in line with our expectations. As mentioned earlier, an inverse-head-and-shoulder pattern is in the making with the neckline at 1,447-50 MYR/tonne levels. Prices have been finding resistance at the trend line as seen in the chart above. We expect prices to consolidate in a range and then rise further higher towards 1,566 MYR/tonne in the coming sessions or even higher towards 1600 MYR/tonne. Crucial support is at 1,445-50 MYR/tonne levels. Only, an unexpected move below 1,408-10 MYR/tonne can cast doubts on our bullish view. 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. We can now expect the explosive third wave to begin. Unexpected break below 1,400 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 bullishness.

Prices are above the short-term 8-day period EMA at 1478 MYR/tonne and the 34-day period EMA is at 1455 MYR/tonne. Therefore, look for palm oil futures to consolidate and rise higher.Supports at 1476, 1447 and 1434 ringgits. Resistances at, 1500, 1523 and 1566 ringgits.

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