The Hindu Business Line : Palm oil likely to test support

Malaysian palm oil futures ended lower on Friday, as the exchange hiked margins and weekend profit-taking erased gains made during the week. Cargo surveyors will issue April estimates for Malaysia’s palm oil exports on Monday. Cargo surveyor Intertek Agri Services estimated February exports at 1.09 million tonnes. Another surveyor, SGS (Malaysia) Bhd estimated the number at 1.10 million tonnes. Markets are also keenly watching the soyabean planting in the US and the farmer’s protests in Argentina for further clues on market direction.

Weather is also a key thing being watched in palm oil growing regions now.

CPO active contract rose higher and found resistance. As mentioned in the previous update, there are no clear sign of any upturn so far.

We can expect prices to edge lower again towards 3,375-80 Malaysian ringgit (MYR) a tonne levels now. Failure to find support at 3375-80 MYR/tonne could make prices vulnerable for a further fall towards 3,107 and 3,041 MYR/tonne levels. We favour resistances in the 3,500 MYR/tonne zone to now cap upside attempts and then fall lower again, and only a direct rise above 3,650 MYR/tonne will cause doubts about this bearish view.

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 1,427 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 3,041 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 now.

Supports are at MYR 3425, 3375 and 3231. Resistances are at MYR 3475, 3580 and 3670.

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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