The Hindu Business Line : Palm oil could test resistance

Malaysian crude palm oil futures ended higher on Friday encouraged by rising exports and persistent supply worries. Exports of Malaysian palm oil products during March 1-31 rose 16.3 per cent to 998,758 as estimated by cargo surveyor SGS.

Market also awaits March exports, production and stocks data to be issued by state-run Malaysian Palm Oil Board on Tuesday, which is expected to provide further impetus for this bullish rally. Bullish fundamentals are favouring a rally in palm oil futures apart from external factors like energy prices.

CPO active June contract rose higher as expected. As mentioned in the previous update, break of the 2061 Malaysian ringgit (MYR) a tonne is seen bullish with potential to test 2295 MYR/tonne in the current rally. Near-term resistance is at 2125-30 MYR/tonne levels. The indicators have also started showing highly overbought conditions warning a correction in the offing.

Support will now be seen at 2048 MYR/tonne followed by deeper support at 2005 MYR/tonne. Fall below 1978 MYR/tonne will result in a deeper correction. 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 2078 MYR/tonne indicating bullishness and the 34-day period EMA is at 2004 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and then correct lower.

Supports are at 2076, 2048 and 2005 ringgits. Resistances are at 2125, 2183 and 2242 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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