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Malaysian palm oil futures ended marginally lower booked profits from a rally that pushed prices to record highs. Prices are expected to be underpinned as production takes a hit from monsoon flooding last month. Exports are expected to climb as China, the world’s largest edible oil buyer, locks in supplies for the Chinese New Year festivities in early February. Malaysia palm oil stocks are expected to fall in December, after floods cut output in the world’s sec ond-biggest producer and exports climbed. Energy futures though corrected on Friday, and indicating a fall, which is expected to put a lid on CPO futures.

CPO active contract continued to rally higher relentlessly. Price gaps in the 3095 Malaysian ringgits (MYR) a tonne range is expected to get filled on the downside. Though near-term potential exist for a rise towards the target area near the 3300 MYR/tonne, multiple divergences in different time frames does not give the confidence for such a move to happen immediately. A corrective down move could begin anytime now towards 2895 MYR/tonne levels being another technical gap area, which is our favoured view. Both soya oil and energy futures are also looking vulnerable for a downward correction and it is better to maintain caution and not get carried away by market forces. 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 MYR 2700 levels or worst-case MYR 2400 a tonne.

RSI is in the overbought zone indicating a correction to take place. 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 3095, 3005 and 2945. Resistances are at MYR 3165, 3260 and 3320.

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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