The Hindu Business Line : Bullish signals for palm oil

Malaysian crude palm oil futures ended sharply higher on Friday due to stronger soya oil prices and helped by talks of Chinese buying. Decline in exports or a revision higher in base import prices of palm in India did not affect the sentiment in the market.

Cargo surveyor Societe Generale de Surveillance, closely watched by the markets, said exports of Malaysian oil palm products for June were 1,084,333 tonnes, down 5.4 per cent from the 1,146,610 tonnes estimated in May. Higher energy prices are still underpinning CPO futures as foreign demand for palm oil for bio-diesel will continues to rise.

CPO active month futures now looks set to move higher, initially targeting 1,523-25 Malaysian ringgit (MYR) a tonne being the long-term trend line resistance point. A daily close above this point should result in further strengthening of prices targeting 1,575-85 MYR/tonne followed by 1,631 MYR/tonne.

Good support should now be seen in the 1,478-82 MYR/tonne levels and only a move below 1,428 MYR/tonne will signal bearishness.

We will continue to stick with the same favoured wave counts. 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. Un expected break below 1,375 MYR/tonne, will force us to abandon this count. RSI is in the overbought zone indicating a possible correction lower to take place.

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 1,472 MYR/tonne and the 34-day period EMA is at 1,461 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels. Supports are at 1478, 1452 and 1434 ringgits. Resistances are at 1502, 1525 and 1585 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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