The Hindu Business Line : Palm oil may test resistance

Malaysian palm oil futures ended lower on Friday as weak export data confirmed current fears of slowing demand amid rising stocks. Malaysian palm oil exports during the June 1-20 period were estimated at 754.539 tonnes, down almost 10 per cent from the same period last month, according to cargo surveyor SGS. Soya futures on the Chicago Board of Trade have been oscillating with no clear directional moves. The demand scenario for palm still remains weak with swelling stocks and poor export off take. However, hopes are high for big purchases by India/China during July/August/September to emerge due to the up coming festival season.

CPO active contract is still moving in the range we anticipated in the previous update. Resistance has been strong in the 3740-95 Malaysian ringgit (MYR) tonne range, where it failed to push higher thrice in the past few months. A diagonal triangle pattern is seen and a breakout level on the downside is at 3518-20 MYR/tonne levels. Resistance are at 3650 MYR/tonne followed by 3740 MYR/tonne.

Favoured view expects a break lower now to decline sharply lower towards 3300 MYR/tonne levels or even lower as long as resistances cap upside attempts. 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 in progress now.

A possible fifth wave could have begun and a close above 3910 MYR/tonne could confirm this possibility. 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.

Supports are at MYR 3518, 3435 and 3338. Resistances are at MYR 3650, 3740 and 3835.

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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