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

Malaysian palm oil futures ended mostly higher on Thursday as market participants wound up positions ahead of a long week-end. Market sentiment remained weak for palm, due to a sharp drop in exports as reported by cargo surveyors and weakness in US crude oil markets. Exports of Malaysian palm oil products in January fell 28.2 per cent to 1,036,926 tonnes from 1,443,850 tonnes in December, cargo surveyor Societe Generale de Surveillance said on Thursday. However, continued strength in the Soy complex is expected to underpin CPO futures.

CPO active contract is consolidating in a narrow range, waiting for further direction. A positive move in the soya complex on Friday, is expected to rub off on CPO futures and a break higher towards 3400 or even higher towards 3500 Malaysian ringgit (MYR) tonne levels look likely. However, unexpected fall below 3145 MYR/tonne could open the downside for a sharp correction lower targeting 2985 MYR/tonne or even lower. As per our favoured view in the previous update, we expected a correction to 3041 MYR/tonne, which was materialized. We do not have a favoured view for this update. 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 2895 levels or worst-case 2700 MYR/tonne. RSI is in the neutral zone indicating that it is neither overbought nor oversold. 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 3195, 3045 and 2895. Resistances are at MYR 3365, 3460 and 3526.

Gnanasekaar .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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