The Hindu Business Line : Palm oil may test resistance, drop

Malaysian palm oil futures ended sharply higher hitting a record high. A rise in Malaysian palm oil exports despite high prices, firm crude oil prices and a rise in soya oil prices contributed to the rise in crude palm oil futures. Rumours that China may cut the import duties on vegetable oils to keep local prices in check boosted sentiment further. Cargo surveyor, SGS (Malaysia) Bhd estimated Malaysia’s palm oil exports 3.3 per cent higher at 1.11 million tonnes during October 1-25.

CPO active February month contract moved perfectly in line with our expectations. A correction towards 2890 Malaysian ringgit (MYR) tonne was followed by a rise higher again. The resistance zone is now between 3075-3145 MYR/tonne levels, also a trend channel resistance point. A possible turnaround could be seen in this zone going forward. Supports are now at 2914-25 MYR/tonne levels followed by 2820 MYR/tonne. As long as the long-term trend line point at 2700 MYR/tonne holds we believe this up trend should continue for a rise towards 3300 MYR/tonne levels eventually. A new impulse began from 1427 MYR/tonne as per the recent wave counts. We could still be in the fifth wave impulse and not an end as mentioned in the previous update. We can expect a corrective A-B-C to begin now targeting 2700 levels or worst-case 2400 MYR/tonne. RSI is in the overbought zone now indicating a possible correction in the offing. 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 3015, 2924 and 2890. Resistances are at MYR 3069, 3145 and 3225.

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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