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Malaysian palm oil futures ended lower on Friday on profit-taking as the volatile energy complex weighed on edible oil complex. Exports have been robust for the month of November, though output was expected to show a record for the same period. However, prices could find support now due to the implementation of a mandatory bio-diesel blend, up-coming Chinese New Year demand, and interest rates cut in major consumer China further expected to underpin demand. The differentia ls between soya oil and palm oil are also highly in favour of palm and production unlikely to rise further due to falling yields.

CPO futures fell lower against our expectations. As cautioned, in the previous update, failure to cross the recent high at 1745-50 Malaysian ringgit a tonne (MYR/tonne) and a break below 1400 MYR/tonne has opened the way for a test of recent lows or even lower. A bearish continuation pattern is seen now with a possibility of testing 1200 MYR/tonne levels. Important resistance is at 1555 MYR/tonne. As long as 1595-1600 MYR/tonne caps upside attempts, we can eventually expect prices to test the downside at 1200 MYR/tonne. Unexpected rise above 1595 MYR/tonne could only take prices towards 1700 MYR/tonne, only to fall again. 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 1575, 1640 and 1700.

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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