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Gnanasekar T.

Malaysian crude palm oil futures ended sharply higher on Friday to fresh eight-year highs on the back of rallying crude oil and soya oil future prices.

Crude oil market often lends support to vegetable oils, including palm and soyabean, because of their growing use in making bio-diesel, which competes with petroleum diesel. Expectation of lower output and stronger exports in the coming months will keep prices underpinned and any weather aberrations from here on, would lift prices further higher.

CPO active June contract rose higher in line with our expectations. Break of the 2061 Malaysian ringgit (MYR) a tonne is seen bullish with potential to test 2295 MYR/tonne in the current rally. However, as mentioned in the previous update, there is a strong resistance at 2125 MYR/tonne in the middle. The indicators are also displaying heavily overbought conditions and a downward correction looks likely before the rise to potential targets mentioned above.

Support will now be seen at 2005 MYR/tonne followed by deeper support at 1961 MYR/tonne region a trend line support point. Fall below 1942 MYR/tonne will cause doubts on the bullishness. A new impulse began from 1427 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 above the short-term 8-day period EMA at 2022 MYR/tonne indicating bullishness and the 34-day period EMA is at 1966 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and then correct lower.

Supports are at MYR 2035, 2005 and 1978. Resistances are at MYR 2081, 2125 and 2180.

(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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