The Hindu Business Line : Palm oil futures may test resistance

Malaysian crude palm oil futures ended lower Friday on weekend and year-end profit-taking. Producing areas of Malaysia and the second largest palm oil producer, Indonesia have been hit by heavy rains which spurred a strong rally that sent prices to eight-year highs. Rains and floods are expected to cut palm oil output. State-run Malaysian Palm Oil Board is due to release December palm oil production, exports and closing stocks data on January 10.

CPO active March month contract rose higher as expected. The long-term rising trend line resistance at 2057-65 Malaysian ringgit a tonne level was tested and prices fell from there. Resistance will now be strong in the 2025-30 MYR/tonne levels. Initial support will be at 1957-60 MYR/tonne levels. A fall to 1858 MYR/tonne levels can be expected in the coming sessions, being the Fibonnaci 38.2% retracement level, on the back of topping signs seen in charts and overbought conditions in the indicators. 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 in the offing. It is also showing a negative divergence. The averages in MACD are above the zero line in the indicator suggesting bullishness to be intact. Prices are below the short-term 8-day period EMA at 1957 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1864 MYR/tonne. Therefore, look for palm oil futures to test the support levels.

Supports at MYR 1965, 1928 and 1865. Resistances at MYR 2025, 2045 and 2070.

(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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