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Malaysian palm oil futures ended lower on Friday but managed to end off lows due to weekend short-covering mostly due to slumping crude oil prices. Fundamental factors have also been changing for the better. Energy prices are near record lows prompting a bullish reaction. Malaysian stocks are expected to see a decline from December as bad weather could hit output and the government pushes forward with its bio-diesel plans. Exports also rose higher for the period November 1 -20 by almost 22 per cent to 8,44,750 tonnes as the cargo surveyor SGS.

CPO futures are consolidating in line with our expectations. A bearish undertone still persists. However, rise above 1575 Malaysian ringgit (MYR) a tonne could trigger a bullish reaction and stretch towards 1725 MYR/tonne levels. Another important resistance lies at 1901 MYR/tonne beyond this. Possibility of a test of 2077 MYR/tonne cannot be ruled out being a fibonnaci retracement point. This is our favoured expectation. However, failure to cross the recent high at 1725 MYR/tonne and a break below 1370 MYR/tonne could once again drag prices lower towards recent lows or even lower. The 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 neutral zone now, indicating that it is neither oversold nor overbought.

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 consolidate and rise higher subsequently.

Supports are at MYR 1430, 1395 and 1330. Resistances are at MYR 1565, 1689 and 1725.

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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