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

Malaysian palm oil futures ended marginally lower on Friday due to weak underlying fundamentals. However, the energy markets and the soya complex continue to support prices on the downside. Exports continue to show a weakening trend amid increasing stock piles. Palm oil stocks are estimated to have reached a record high in June, and with exports unlikely to improve until August, palm prices are expected to hover in a range.

CPO active contract is still moving in the range we anticipated in the previous updates. No change in view. Support was found near the 3500 Malaysian ringgit (MYR) a tonne levels this time around. But prices are still stuck in the broad diagonal triangle bearish pattern as discussed in the previous update. Resistance has been strong in the 3745-95 MYR/tonne range, where it failed to push higher thrice in the past few months. Favoured view till expects a break lower now to decline sharply lower towards 3300 MYR/tonne levels or even lower as long as resistances at 3745-95 myr/ton 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 resistance levels and correct lower subsequently.

Supports are at MYR 3568, 3510 and 3435. 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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