The Hindu Business Line : Downward tweak likely in palm oil

Malaysian crude palm oil futures ended lower on Friday on profit booking after reaching fresh eight-year highs earlier in the week in response to a bullish price outlook at the Indonesian price outlook conference. Market awaits key exports and stocks data next week for further direction. Malaysia's exports picked up in April after months of slowdown because of demand from the world's top importers, China and India. Exports of Malaysian palm oil products in April rose 13.3 per cent to 1,131,100 tonnes from 998,759 tonnes shipped in March.

CPO active July contract surged higher in line with our expectations. Break of resistance point at 2245 Malaysian ringgit/tonne levels took prices further higher above the recent high. With the indicators still displaying highly overbought conditions, a good corrective dip is in the offing.

Important supports are at 2240 MYR/tonne followed by 2198 MYR/tonne. Ideally, after the corrective dip, the rally could continue higher towards 2352 MYR/tonne from where it could fizzle out or head to 2465-80 MYR/tonne levels being a rising trend channel resistance level.

A new impulse began from 1427 MYR/tonne as per the recent wave counts. We are in 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-day period EMA at 2145 MYR/tonne indicating short-term bearishness and the 21-day period EMA is at 2006 MYR/tonne. Therefore look for palm oil futures to correct lower.

Supports are at 2198, 2076 and 2045 ringgits. Resistances are at 2305, 2352 and 2400 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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