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Malaysian crude palm oil futures ended marginally lower on Friday. Any sell-off in palm oil is being supported well on fears of renewed torrential rains in the key growing areas.

CPO futures gained sharply higher during the week boosted by India's decision to cut import duties on vegetable oils. Exports continued to show a decreasing trend.

Exports of Malaysian palm oil products for January 1-25 fell 19.7 per cent compared to the same period in December.

CPO active April month contract found strong support near the 1850 Malaysian ringgit (MYR) tonne levels. Good resistance will be seen at 1920 MYR/tonne levels and as long as 1941 MYR/tonne caps advances, we can still expect a test of 1800 MYR/tonne levels and possibly even fill the gap at 1788 MYR/tonne.

Only a move above 1950 MYR/tonne will indicate bullish strength again.

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 on the verge of going below the zero line in the indicator suggesting a bearish reversal to happen. Prices are below the short-term 8-day period EMA at 1887 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1883 MYR/tonne.

Therefore, look for palm oil futures to fall lower and test the support levels.

Supports are at 1850, 1806 and 1785 ringgits. Resistances are at 1910, 1950, and 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.)

Gnanasekar. T

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