The Hindu Business Line : Palm oil may correct lower

Societe Generale de Surveillance (SGS), one of the two cargo surveyors watched by the industry, said on Monday Malaysia exported 708,345 tonnes of palm oil between March 1 and 20, down 4.8 per cent from the 744,152 tonnes it tracked for February 1-20.

Its next estimate for March 1-25 is due on Monday. Adding support to CPO futures, energy prices are up again on expectations of summer gasoline demand and supply disruptions in Nigeria. No change in view. Immediate resistance will be seen at 1474-78 Malaysian ringgit (MYR) a tonne. Failure to cross this level could indicate further bearishness ahead and test 1428-30 MYR/tonne in the near-term, and subsequently bounce sharply higher from there.

We still believe prices could slowly edge higher towards 1566 MYR/tonne in the coming months or even higher towards 1600 MYR/tonne. Only, an unexpected move below 1408-10 MYR/tonne can cast doubts on our overall 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 1329 MYR/tonne. We can now expect the explosive third wave to begin. Unexpected break below 1400 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 have gone below the zero line in the indicator suggesting bearishness. Prices are below the short-term 8 period EMA at 1451 MYR/tonne indicating short-term bearishness and the 34 period EMA is at 1459 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and correct lower.

Supports are at 1445, 1434 and 1424 ringgits. Resistances at 1478, 1489 and 1517 ringgits.

(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.)

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