The Hindu Business Line : Palm oil may test support, rise

Malaysian palm oil futures ended sharply lower on Friday despite a positive estimate from the cargo surveyors for the month of October. Energy futures turned weak by the end of the week as crude oil fell on weak US third-quarter economic data that renewed demand worries. SGS, the cargo surveyor, said on Friday that exports of Malaysian palm oil products rose 5.6 per cent to 1,277,326 tonnes in October, from 1,209,265 tonnes shipped in September. Markets were not inspired b y the export numbers as the stock situation is unlikely to ease despite a pick-up in exports.

CPO futures headed lower and tested the support levels in line with our expectations. Big picture price structures are once again indicating the possibility of a pullback higher, but the short-term picture is still unclear. We can either expect a sharp pullback from 1400 Malaysian ringgit a tonne (MYR/tonne) levels or prices could once again test the recent lows of 1330 MYR/tonne or even lower and then rise higher from there. We can expect some basing signs either at 1400 MYR/tonne levels or at 1250 MYR/tonne levels followed by a gradual rise towards 1727 MYR/tonne being a near-term resistance level. Another important resistance lies at 1901 MYR/tonne. A new impulse began from 1427 MYR/tonne and this could be the third wave, which has at 4486 MYR/tonne. A prolonged corrective fourth wave in the form of A-B-C is in progress now. Believe we could be in a wave “C” with possible targets extending even lower towards 1600 MYR/tonne. RSI is in the oversold zone now, indicating that it is neither oversold and a possible upward correction in the offing. A positive divergence has been violated which is sign of further bearishness to continue. The averages in MACD are still below the zero line of the indicator indicating overall bearishness to be intact. Therefore, look for palm oil futures to test the support levels and subsequently rise higher.

Supports are at MYR 1425, 1370 and 1251. Resistances are at MYR 1565, 1727 and 1901.

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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