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Malaysian palm oil futures ended lower on Friday due to negative leads from the soya oil and the energy complex. The fall has been quite severe across the board on all commodities which has seen huge liquidation from funds. It has been especially severe in energy from which edible oils received tremendous support so far. Higher production and waning exports are weighing on prices. Markets would keenly watch for the exports data for any further leads to see if demand has gr own substantially or not.

CPO active is moving in line with our expectations. As mentioned in the previous update, markets have tested some key supports so far, but have not shown any clear signs of a reversal yet. Only a direct rise above 2950 Malaysian ringgit (MYR) a tonne could induce some bullishness ahead. Crucial support is at 2710 MYR/tonne now. Failure to find support here could ultimately drag it lower towards 2495-2500 MYR/tonne levels also an equality wave target. This level could see good buying interest as most indicators drop into extreme oversold conditions. 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. Believe we could be in a wave “C” with possible targets near 2500 MYR/tonne. RSI is in the oversold zone now, indicating that a possible correction is due. The averages in MACD have gone below the zero line of the indicator indicating a bearish reversal. Therefore, look for palm oil futures to test the support levels.

Supports are at MYR 2710, 2645 and 2550. Resistances are at MYR 2825, 2955 and 3065.

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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