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Malaysian palm oil futures ended lower on Friday on profit-taking ahead of the weekend. Energy futures continue to offer support for CPO futures. Strong crude oil prices generally fuel demand for palm oil to manufacture bio-diesel. However, a volatile soya oil futures is expected to drag CPO futures lower in the coming week. Fresh fundamental cues are also likely from output and production data for September from the Malaysian Palm Oil Board, due for release on Wednesday. Cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd are also expected on Wednesday to release palm oil export numbers for Oct. 1-10.

CPO active month contract is moving in line with our expectations. Break of support at 2598 Malaysian ringgit/tonne and expectation of a good downward correction in CBOT soya oil futures leads us to believe we could see a good correction in CPO futures as well. Direct rise above 2678 MYR/tonne, however will be a bullish sign heading for 2725 MYR/tonne. Favored view expects a fall towards 2485 MYR/tonne or even lower. 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 neutral zone indicating that it is neither overbought nor oversold. Minor negative divergences are also seen in the indicator cautioning against aggressive longs. The averages in MACD are above the zero line in the indicator indicating bullishness to be intact. Therefore look for palm oil futures to correct lower and find support at lower levels.

Supports are at 2545, 2483 and 2410 ringgits. Resistances are at 2631, 2678 and 2703 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 price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

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