The Hindu Business Line : Palm oil futures may rise higher

Malaysian crude palm oil futures ended lower in thin volumes as holidays in China kept buyers at bay. Chinese buying is expected to return next week and China is emerging as the biggest buyer of palm oil. However, a stronger ringgit makes palm oil relatively higher for overseas buyers and resulting in less realization for Malaysian exporters. Exports posted a decent increase for the month of April as per market expectations, growing by 11.8 per cent as estimated by SGS. Demand for palm oil for production of bio-diesel will keep prices well supported on dips as energy prices rule at record highs.

CPO futures edged lower testing the crucial psychological 1,450 Malaysian ringgit (MYR) a tonne. Support should be seen at 1,440 MYR/tonne levels followed by crucial support at 1,425 MYR/tonne being the long-term trend line support point. We continue to maintain our view that 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 1,415-20 MYR/tonne should be undisturbed. 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 1,375 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 below the short-term 8-day period EMA at 1,462 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1,457 MYR/tonne. Therefore, look for palm oil futures to test the support levels and rise higher subsequently.

Supports are at MYR 1445, 1434 and 1425. Resistances are at MYR 1465, 1478 and 1519.

(The author is director, Commtrendz Research, and 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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