The Hindu Business Line : Palm oil may test resistance

Malaysian crude palm oil futures ended sharply higher boosted by a very strong showing in the CBOT soya oil futures. Surging Indian food demand, possible lower output, unpredictable weather conditions and Europe's appetite for bio-fuels is expected to underpin palm oil futures in the coming year.

Exports of Malaysian palm oil products for March 1-20 fell 6.1 per cent to 5,96,774 tonnes as per estimates of the cargo surveyor SGS.

CPO active June contract pulled back strongly higher. Immediate resistance is at 2,035 Malaysian ringgit/tonne followed by the recent high at 2,061 MYR/tonne. Break of the 2,061 MYR/tonne is seen bullish with potential to test 2,295 MYR/tonne in the current rally. However, there is a strong resistance at 2,125 MYR/tonne in the middle.

Support will now be seen at 1,978/80 MYR/tonne followed by deeper support at 1,942 MYR/tonne region. Fall below 1,942 MYR/tonne will cause doubts on the bullishness. A new impulse began from 1,427 MYR/tonne as per the recent wave counts. We are in the beginning of the fifth wave move of that impulse.

RSI is in the overbought zone indicating a possible correction lower. 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 period EMA at 1,975 MYR/tonne indicating short-term bearishness and the 34 period EMA is at 1,943 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels.

Supports are at 1,978, 1,942 and 1,910 ringgits. Resistances are at 2,040, 2,061 and 2,125 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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