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Malaysian palm oil futures rose to record highs on Friday tracking gains in CBOT soya oil and a rise in energy futures. CPO active January month contract is rising higher in line with our expectations. As mentioned in the previous update, test of psychological resistance at 3,000 Malaysian ringgit (MYR) a tonne looks a possibility now. Immediate resistance is at 2,960 MYR/tonne followed by the psychological resistance at 3,000 MYR/tonne. Overbought conditions in the edible oil and energy complex could lead to a corrective decline in the coming week. When the momentum is strong like the present trend, and prices getting into uncharted territory, it will be difficult to put a number to a potential top. However, we could be somewhere near it and prefer to wait for clear conformations in the coming weeks. A new impulse began from 1,427 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 a correction to take place. Signs of 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 test the resistance levels and then correct lower subsequently.

Supports are at MYR 2883, 2810 and 2785. Resistances are at MYR 2935, 2985 and 3025.

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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