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

Malaysian palm oil futures ended lower on Friday, hitting a three-week low on slowing demand. Cuts in Indonesian export taxes, a firmer ringgit against the dollar and dismal Asian demand seem to be weighing on CPO futures lately. Overnight cues have been positive though. Energy prices once again resumed higher on geo-political concerns, and fears of a recession in the US eased after a better-than-expected payroll data. The soya complex also rallied higher due to uncertainty over the farmers strike in Argentina.

CPO active contract tested the supports in line with our expectations. Crucial resistance is in the 3,500 Malaysian ringgit (MYR) a tonne zone now. Failure to surpass this level will now lead to loss of confidence and huge fall below 3,000 MYR/tonne can be expected. However, prices structures still favour bullishness as long as supports at 3,275 or even lower to 3,210 MYR/tonne levels hold. Immediate resistance is at 3,425 MYR/tonne, a trend line resistance point.

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.

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 resistance levels and then fall lower again.

Supports are at MYR 3305, 3278 and 3210. Resistances are at MYR 3395, 3425 and 3510.

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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