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Malaysian crude palm oil futures ended sharply higher on Friday on weather concerns. Heavy rainfall is again forecast over the weekend. Exports of Malaysian palm oil products in December fell almost 13 per cent to 1,366,111 tonnes as estimated by cargo surveyor SGS.

A sharp fall in energy prices has taken out some premium it enjoyed on the back of the bio-diesel euphoria. Most of the bullish factors for palm have already been priced in and the markets will now look to cling on to anything bearish.

CPO active March month contract fell in line with our expectations. No change in view. The long-term rising trend line resistance at 2057-65 Malaysian ringgit (MYR) a tonne levels was tested and prices fell from there. Any rally above 2010 MYR/tonne is expected to find resistance for another decline to 1900 MYR/tonne or even lower to 1858 MYR/tonne levels, being the Fibonnaci 38.2 per cent retracement level.

Only a move above 2040 MYR/tonne will force us to abandon our bearish view. 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 neutral zone indicating that it is neither overbought nor oversold. 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 1952 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1878 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and then fall lower again.

Supports are at MYR 1952, 1910 and 1865. Resistances are at MYR 2010, 2045 and 2082.

(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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