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Gnanasekar. T

Malaysian crude palm oil futures ended higher supported by strong CBOT soya oil futures. Markets have been nervous ahead of the export and output data due next week.

The state-run Malaysian Palm Oil Board will release palm oil output, export and closing stocks data for January on Monday, when surveyors Intertek Testing Services and Societe Generale de Surveillance release their export numbers for Feb. 1-10.

CPO active contract tested the resistance levels and edged lower again. Important resistance is at 1965 Malaysian ringgit (MYR) a tonne and a daily close above 1978 MYR/tonne will rekindle bullish expectations for a test of the recent highs at 2061 MYR/tonne or even higher.

However, the technical pattern is causing lots of doubts. A clear head and shoulder pattern is in the making, which is bearish. Crucial support is at 1840 MYR/tonne being the trend line support point. 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.

Prices are above the short-term 8-day period EMA at 1908 MYR/tonne indicating a bullish reversal and the 34-day period EMA is at 1891 MYR/tonne. Therefore, look for palm oil futures to test the support levels again.

Supports are at 1865, 1838 and 1805 ringgits. Resistances are at 1950, 1978 and 2005 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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