The Hindu Business Line : Palm oil may head lower

Malaysian crude palm oil futures ended marginally higher on Friday on short covering. CPO futures were weak in line with a sharp fall in energy prices. Palm oil is increasingly tracking crude oil prices because of the rapidly expanding global bio-fuel industry based on vegetable oils, which are seen as a cheaper alternative to fossil fuels.

Though there are expectations of oil to fall below $50, the threat of a production cut by the OPEC, which controls about 40 per cent of the global oil supply should keep prices well above $50 for the foreseeable future.

CPO active month contract fell lower against our expectations. The pullback to 1569 Malaysian ringgit (MYR) a tonne did not follow-through higher leading to a fall again. Important support is at 1485 MYR/tonne being the long-term trend line support point. And, resistance will be strong at 1575-78 MYR/tonne followed by 1603 MYR/tonne levels.

CPO futures are expected to be range-bound in the coming week with a bias towards the downside. 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.

Only a break below 1408 MYR/tonne can alter the wave counts. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line in the indicator suggesting bearishness.

Prices are above the short-term 8-day period EMA at 1538 MYR/tonne indicating short-term bullishness and the 34-day period EMA is at 15353 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and head lower subsequently.

Supports are at MYR 1522, 1510 and 1485. Resistances are at MYR 1578, 1602 and 1627.

(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.)

More Stories on : Technical Analysis | Oilseeds & Edible Oil

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
It's now organic eggs!

Coonoor tea prices drop on low demand

Plantation policies' review mooted

Palm oil may head lower

Gold futures may rise before fall

Metal prices may continue to remain firm

Oil Palm India plans expansion

Competitive price gives edge to Indian pepper

ICF on fast track

AP foodgrain output likely to fall this year

Gold under pressure; Time to buy?