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Gnanasekar T.

Malaysian crude palm oil futures ended higher on Friday on expectations of robust export figures to be released by cargo surveyors next week.

Earlier in the week CPO futures rose to multi-year highs due to possibilities of a fall in output due to weather aberrations and prospects of higher exports. However, profit taking in CBOT soya oil and a widespread fall in energy prices is expected to cap any major advances in the short-term.

CPO active January month contract rose sharply higher in lines with our broad expectations. As seen in the chart above a crucial trend line resistance has been broken which signals the beginning of a long rally.

As mentioned earlier, a bullish triangle pattern is in the making and a break above key resistance at 1755-60 Malaysian ringgit (MYR) a tonne has the potential to rise higher for a minimum target of the recent high at 2003 MYR/tonne followed by another technical objective at 2600 MYR/tonne. 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 powerful third wave impulse.

RSI is in the overbought zone indicating a correction to take place. The averages in MACD are above the zero line in the indicator suggesting bullishness to be intact. Prices are above the short-term 8-day period EMA at 1730 MYR/tonne and the 34-day period EMA is at 1664 MYR/tonne.

Therefore, look for palm oil futures to test the resistance levels and then correct lower.

Supports are at 1743, 1728 and 1697 ringgits. Resistances are at 1678,1705 and 1735 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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