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Malaysian palm oil futures ended lower on Friday as the CPO markets took the lead from a weak soya oil and energy market. Despite, a large discount palm oil enjoys against soya oil, a volatile energy markets and a similar soya complex will continue to pressure markets. The only positive for the market is the large discount against soya oil and a festival season ahead. Exports have also been robust ahead of the festival season. However, stocks are at an all-time high and ex ports need to rise more sharply to ease pressure on rising stocks. Cargo surveyor SGS estimated exports in July at 1.39 million tonnes up almost 26.2 per cent.

CPO futures continue to display bearish tendencies. The pullbacks we anticipated did not materialize and prices continue to show an inclination to test the downside levels now. Fall below 2430 Malaysian ringgit (MYR) a tonne has triggered the downward move. This decline could drag prices sharply lower towards anticipated targets at 2200 MYR/tonne levels. This will also coincide with bean oil finding good a base at around 46-47c, being a long-term trend line support point. As long as 2645 MYR/tonne caps upside attempts, we now expect downside targets at 2200 MYR/tonne to be met. 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/ton. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. 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 2410, 2325 and 2200. Resistances are at MYR 2475, 2565 and 2650.

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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