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Malaysian palm oil futures ended higher on Friday on week-end short-covering. Energy futures making new highs is helping sentiment for palm oil.

Renewed storm fears drove energy futures to new high during the week.

This may add to demand for palm oil to manufacture bio-diesel. Firm edible prices across the range of all edible oils including CBOT Soyaoil futures is seen underpinning CPO futures.

The CPO active month contract moved higher in line with our expectations and tested the resistance levels. As mentioned in the previous update, resistance at 2550-60 myr/tonne levels has been taken out opening the way for 2650 myr/tonne initially, where it is expected to find good resistance.

Supports are now at 2545 myr/tonne and 2516 myr/tonne and ideally these levels are expected to hold supports. However, an unexpected fall below these support points could arrest the bullishness temporarily.

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 after the current impulse ends. RSI is in the overbought zone indicating that a minor correction is in the offing. Minor negative divergences are also seen in the indicator cautioning against aggressive longs. The averages in MACD are below the zero line in the indicator bearishness to be intact.

Therefore, look for palm oil futures to test the resistance levels and correct lower subsequently. Supports are at 2545, 2510 & 2465 ringgits. Resistances are at 2650, 2698 & 2761 ringgits.

Gnanasekar T.

(The author is the Director at 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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