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Gnanasekar T.

Malaysian crude palm oil futures ended mixed in thin trading waiting for fresh leads for direction. This was despite, a positive outlook by Industry officials, at a price outlook conference in Kuala Lumpur, which ended on Wednesday.

Surging Indian food demand, possible lower output and Europe's appetite for bio-fuels is expected to underpin palm oil futures in the coming year. However, risks persist in the energy markets, on worries about reduced demand on the back of under performing US economy and huge supplies.

CPO active June contract tested resistance levels and have edged lower again as expected. Support will be seen at 1941 Malaysian ringgit (MYR) a tonne a trend line support point followed by deeper support at 1908-10 MYR/tonne region. Fall below 1895 MYR/tonne will be a bearish sign resulting in loss of confidence, and leading it sharply lower towards 1785 MYR/tonne levels too.

Only a move above 2015 MYR/tonne will rekindle bullish expectations now.

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 still above the zero line in the indicator suggesting bullishness to be intact. Prices are below the short-term 8-day period EMA at 1953 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1930 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and head lower again.

Supports are at 1940, 1910 and 1885 ringgits. Resistances are at 1985, 2005 and 2040 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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