The Hindu Business Line : Palm oil likely to increase

Malaysian crude palm oil futures ended lower Friday in thin volumes as market participants awaited export estimates next week. The estimates of April 1-25 exports are due to be issued next Tuesday by cargo surveyors Societe Generale de Surveillance and Intertek Testing Services. A surge in CBOT soya oil futures will also underpin CPO futures in the coming week. Fundamentals are looking better for palm oil now with expectations of lower output fall in palm oil stocks and good export demand setting in from China. Energy prices have also hit historic highs further supporting CPO prices. The only factor that could limit the rise in futures is the continuing strength of the ringgit against the dollar.

CPO futures consolidated as per our expectations. As mentioned in the previous up date, prices are expected to consolidate in a range before we see the next move unfold. Good support will now be seen at be noticed at 1,445-50 Malaysian ringgit (MYR)/tonne levels. We still believe prices could slowly edge higher towards 1,566 MYR/tonne in the coming months or even higher towards 1,600 MYR/tonne as long as 1,380 MYR/tonne remains intact.

For the bull-run to remain intact 1,420 MYR/tonne should be undisturbed and a break above 1,475-78 MYR/tonne will signal the resumption of up trend. 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 1329 MYR/tonne. We can now expect the explosive third wave to begin. Unexpected break below 1375 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 above the zero line in the indicator suggesting a bullish reversal. Prices are above the short-term 8-day period EMA at 1452 MYR/tonne indicating short-term bullishness and the 34-day period EMA is at 1,449 MYR/tonne. Therefore, look for palm oil futures to rise higher and test the resistance levels.

Supports at MYR 1,445, 1,434 and 1,420. Resistances at MYR 1,478, 1,500 and 1,534.

(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.)

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