The Hindu Business Line : Palm oil may test support, dip

Malaysian crude palm oil futures ended lower on Friday due to continuance of lack of any positive fundamental triggers. Fears of lower exports and the subsequent effect on stocks are starting to take its toll on prices.

This coupled with falling CBOT soya oil futures further added to the pressure.CPO futures are increasingly showing signs of exhaustion and could possibly fall sharply lower.

Near-term support is at 1435-36 Malaysian ringgit (MYR) tonne levels and a move below this trend line point could trigger a sharp fall to 1408-10 MYR/tonne levels or even lower to 1382 MYR/tonne levels.

We are now wary of bullishness, due to failure of prices to follow-through higher.

Prices should find good resistance now in the 1450-60 MYR/tonne range. We will stick with the same wave counts till we see a good move unfold either ways. 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 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 are above the zero line in the indicator suggesting bullishness.

Prices are below the short-term 8-day period EMA at 1452 MYR/tonne and the 34-day period EMA is at 1451 MYR/tonne.

Therefore, look for palm oil futures to test the support levels and fall lower.

Supports are at 1435, 1425 and 1410 ringgits. Resistances are at 1452, 1478 and 1495 ringgits.

(The author is the director of 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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