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Malaysian crude palm oil futures fell lower on Friday on profit taking. Fresh fundamental leads are expected in the coming week, which can give clues for direction from here on. Data on production, stocks and exports are expected from the official Malaysian Palm oil board, followed by exports figures by the cargo surveyors next week.

However, CPO futures will look closely to CBOT soya oil futures and energy prices, which promises to show strong signs of recovery ahead of the winter season.

CPO active January month contract moved on expected lines. Resistance was seen ahead of 1750 Malaysian ringgit/tonne. This followed by a sharp fall below the psychological level of 1700 MYR/tonne is a negative sign in the short-term. Good support will be seen at 1662 MYR/tonne followed by 1648 MYR/tonne levels, and our favored view is to look for supports to hold and rise to 1750 MYR/tonne levels.

As seen in the monthly chart above, a bullish triangle pattern is in the making and a break above key resistance at 1755-60 MYR/tonne and a close above 1795 MYR/tonne has the potential to take for a minimum target of the recent high at 2003 MYR/tonne followed by another technical objective at 2600 MYR/tonne.

As long as the long-term rising trend line at 1545-1560 MYR/tonne contains downside attempts, the above view looks promising. 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 the third wave impulse. 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. Therefore, look for palm oil futures to correct lower initially and rise higher.

Supports are at 1675, 1648 and 1615 ringgits. Resistances are at 1708,1735 and 1755 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.)

Gnanasekar T.

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