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

Malaysian palm oil futures rose higher on Friday, on record crude oil prices and fears of tightness in the vegetable oil stocks. Strike by Argentina farmers is also seen underpinning prices. The state-run Malaysian Palm Oil Board will release palm oil output, export and closing stocks data for April on May 12. Cargo surveyor Intertek Testing Services will unveil May 1-10 palm oil export data over the weekend while Societe Generale de Surveillance will issues its estimates on Monday. A key demand supply data from USDA released overnight is quite bullish and expected to drive CPO futures higher in the coming week.

CPO active contract moved in line with our expectations. Important resistance is in the 3500 Malaysian ringgit/tonne zone now followed by 3650 MYR/tonne. Failure to surpass these levels could lead to loss of confidence and a huge fall below 3000 MYR/tonne can be expected. As mentioned in the previous update, price structures still favour bullishness as long as supports at 3275 or even lower to 3210 MYR/tonne levels hold. The trend line resistance point at 3425 MYR/tonne, will now tend to support any attempts to decline. 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. 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 3425, 3350 and 3275. Resistances are at MYR 3510, 3575 and 3650.

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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