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Malaysian palm oil futures ended sharply lower on Friday on talks of heavy defaults in the physical markets combined with negative leads from the soya oil and the energy complex. Malaysia’s end-July palm oil stocks are estimated at 1.98 million tonnes, close to an all-time high of 2 million tonnes. The fall has been quite severe across the board on all commodities.

CPO has moved in line with our expectations. Though this fall has been severe and too rapid, it has started giving lots of indications that we could see a smart pullback going forward. Rise above 2560 Malaysian ringgit (MYR) a tonne could be the first indication of such a pullback. And such a rise could lead towards 2615 MYR/tonne or even higher towards 2775 MYR/tonne or on an extreme case up to even 2874 MYR/tonne. Only a daily close above 2950 MYR/tonne could induce some bullishness ahead. Further falls towards 2250 MYR/tonne or even lower to 2025 MYR/tonne cannot be ruled out. 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 extending to 2250 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 and rise higher subsequently.

Supports are at MYR 2395, 2310 and 2250. Resistances are at MYR 2515, 2620 and 2775.

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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