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Gnanasekar T.

Malaysian crude palm oil futures ended lower on Friday on weekend profit taking. Declining CBOT soya oil prices also hurt sentiment, which seemed to turn bullish on fresh weather concerns.

Malaysian crude palm oil output fell 26.3 per cent to 1,144,079 tonnes in December from a month earlier after monsoon rains and floods inundated plantations in the key southern growing region, estimated by the official Malaysian Palm Oil Board (MPOB).

CPO active March month contract moved in line with our expectations. As expected prices found support near the Fibonnaci 38.2 per cent retracement level as discussed in the previous update. A pullback from here can see a test of 1965-70 Malaysian ringgit (MYR) tonne levels or could even extend to 2002 MYR/tonne.

However, our view still remains bearish as long as 2010 MYR/tonne caps advances. Our favoured view will be to look for topping signs in the 1970-80 MYR/tonne regions and fall lower to 1800 MYR/tonne levels.

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 could be possibly tracking a fourth wave correction, which has some more room left on the downside.

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 below the short-term 8 period EMA at 1907 MYR/tonne indicating short-term bearishness and the 34 period EMA is at 1880 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and then fall lower again.

Supports at, 1878, 1852 & 1836 ringgits. Resistances at, 1952, 1970, & 2002 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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