The Hindu Business Line : Palm oil may test resistance

Malaysian palm oil futures surged above 4,000 Malaysian ringgit (MYR) a tonne for the first time on Friday as crude oil’s surge to a record and buoyant export demand triggered a fresh wave of buying by funds and speculators. Some bullish forecasts by leading industry analysts have helped prices to hold up, despite on going fears that the market may be overbought and a correction due soon. Energy futures hit a new high above $103 on Friday after Ecuador shut a key export pipeline and a fire hit a major European natural gas plant, and the dollar’s decline to a succession of lows kept fresh funds flowing in.

CPO active contract moved in line with our expectations. As mentioned in the previous update, being in uncharted territory, makes it difficult to look for past resistance and identify potential targets. Till the freak show in the soy complex ends, it is difficult to arrive at any reasonable targets. The only closest comparison to a move of this sustained momentum was the BSE Sensex, the benchmark Indian stock index. We also saw how the index retraced subsequently!! As seen in the chart above, a trend channel resistance lies in the 4275-4310 MYR a tonne zone now. The wave counts need a complete re-look as the present move has altered most of the big picture counts we have been tracking so far. A new impulse began from 1427 MYR/tonne and this could be the third wave which has not ended so far. We can expect a corrective fourth wave in the form of A-B-C to begin anytime now targeting 3300 levels or worst-case 3041 MYR/tonne. RSI is in the extremely overbought zone on all time frames, which is a rarity, indicating a 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 3928, 3861 and 3705. Resistances are at MYR 4065, 4157 and 4275.

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.)

More Stories on : Technical Analysis | Oilseeds & Edible Oil

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
A new Chaudhary from Harvard via Rae Bareilly?

‘Debt waiver good for banks’

Spot rubber rules steady

Palm oil may test resistance