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Malaysian crude palm oil futures ended sharply higher helped by a strong recovery in soya oil futures. The USDA report on Friday estimated a sharp fall in acreage for soyabean plantings, which will be bullish for CPO futures. Increasing supplies and decreasing exports will however cap any major advances. Palm oil is nearly 14 per cent off an historic high of 2,764 ringgit reached earlier this month due to robust demand from top importers India and China and dwindling stock s at home.

CPO active month contract is moving in line with our expectations. As seen in the chart, the fibonnaci retracement level held well at 2235-40 Malaysian ringgit (MYR) tonne and prices have not gone below this level, which is a bullish sign. We can now expect CPO futures to edge higher towards 2500 MYR/tonne levels and a daily close above 2550 MYR/tonne will once again rekindle bullish expectations for a retest of the recent highs or even higher. However, failure to rise past 2585-2600 MYR/tonne will be construed as a bearish sign and the subsequent fall could lead prices lower towards 2000 MYR/tonne levels, which we do not favour. A new impulse began from 1427 MYR/tonne as per the recent wave counts. We are in the fifth wave move of that impulse. We can expect a corrective A-B-C to begin now. 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. The short-term 8-day period EMA and 21-day period EMA is at 2338 MYR/tonne indicating bullishness in the offing. Therefore, look for palm oil futures to consolidate and rise higher.

Supports are at 2375, 2240 and 2198 ringgits. Resistances are at 2450, 2525 and 2655 ringgits.

Gnanasekar. T

(The author is the Director of Commtrendz Research and also 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 p rice movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

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