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

Malaysian crude palm oil futures ended marginally higher on Friday on bargain-hunting halting four straight days of decline. Energy prices will again be the focus due to the bio-diesel push, as the hurricane season in the US begins and Iran's nuclear row with the West resurfaces.

Exports continue to show a healthy up trend underpinning prices. On Tuesday, cargo surveyor Societe Generale de Surveillance (SGS) said exports of Malaysian palm products for August 1-15 stood at 628,542 tonnes, up 21 per cent from the 520,036 tonnes shipped between July 1 and 15.

CPO active November month futures fell sharply lower on profit-taking and taking out some important support levels. As mentioned in the previous update, failure to hold support at 1640 Malaysian ringgit (MYR) a tonne saw the fall extending lower. Good supports will be seen at 1560-65 MYR/tonne levels followed by 1530 MYR/tonne and retracements to 1625-30 MYR/tonne is expected to find resistance.

As long as 1475-78 MYR/tonne, the rising trend line holds attempts to decline, the overall bullish trend will remain intact. We will continue to stick with the same favoured wave counts. 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 now 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. With the way prices have shot, it makes us believe that the third wave is in progress. 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 to be intact. Prices are below the short-term 8 period EMA at 1626 MYR/tonne indicating short-term bearishness and the 34 period EMA is at 1602 MYR/tonne. Therefore, look for palm oil futures to test the support levels and rise higher again.

Supports are at 1567, 1530 and 1502 ringgits. Resistances are at 1602, 1626 and 1652 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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