The Hindu Business Line : Palm oil may test support, rise

Malaysian palm oil futures ended sharply lower on Friday, on profit-booking. Soya oil futures tanked lower overnight reacting to the on going credit crisis, which is expected have an effect on CPO futures in the coming week. This was despite energy prices making new highs above $110 a barrel. Expectations of Chinese buying is expected to support prices going forward. China’s Commerce Ministry said on Wednesday it would increase the number and volume of products held in state food reserves, as part of efforts to ensure supplies of grains, cooking oil and meat.

CPO active contract moved in line with our expectations. The first support near 3475 Malaysian ringgit (MYR) a tonne, held well and we saw a good retracement from there. However, prices structures hint at further fall towards 3385-45 MYR/tonne levels now, being a long-term trend line support point and an important fibonnaci retracement level. Our preferred view immediately expects a fall towards the support levels mentioned above. However, subsequently, we believe market could build a base here for the next move up again. Failure to find support here at 3345 MYR/tonne could lead prices further lower towards 3107 and 3041 MYR/tonne, which we do not favour. 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 have begun now targeting 3300 levels or worst-case 3041 MYR/tonne. RSI is in the neutral zone now, 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 support levels and rise higher subsequently.

Supports are at MYR 3475, 3345 and 3231. Resistances are at MYR 3695, 3798 and 3875.

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
Spot rubber stays steady

Palm oil may test support, rise

Scheme soon to get farmers out of moneylenders’ grip