The Hindu Business Line : Palm oil may fall, then rise

Malaysian crude palm oil futures ended higher on Friday fuelled by strong estimates from the cargo surveyors. Societe Generale de Surveillance whose numbers are closely tracked by the industry, said exports rose 7.4 per cent to 1,178,379 tonnes during the period October 1-25.

CPO futures rose higher in line with a recovery in energy prices coupled with a strong rally in CBOT soya oil futures.

Energy prices are likely to be underpinned due to the up coming winter season which will in turn support CPO futures.

CPO active January month contract rose higher as expected. As mentioned in the previous update, prices are edging higher towards 1750 Malaysian ringgit (MYR) a tonne levels in the big picture, being a strong trend line resistance level. Good correction from those levels look likely due to a high-overbought reading in indicators. Any declines to 1645-50 MYR/tonne will find good support in the coming week. 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 1504 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 highly overbought zone indicating a correction lower in the offing. The averages in MACD are above the zero line in the indicator suggesting a bullish reversal. Prices are above the short-term 8-day period EMA at 1634 MYR/tonne indicating short-term bullishness and the 34-day period EMA is at 1590 MYR/tonne. Therefore, look for palm oil futures to correct lower initially and rise higher. Supports at 1645, 1628 and 1595 ringgits. Resistances at 1705, 1728 and 1750 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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