The Hindu Business Line : Palm oil may test resistance

Malaysian palm oil futures ended higher on Friday helped by robust exports, firm energy and rising soya oil prices. Positive exports data boosted sentiment and resulted in short-covering and position squaring ahead of a long weekend. The market will be closed on Monday. Exports of Malaysian palm oil products during Dec. 1-25 rose 23.5 per cent to 1,339,255 tonnes from 1,084,545 tonnes shipped between Nov. 1 and 25, cargo surveyor SGS said on Friday. US soya complex, rose h igher to a five-week high, boosted by weather concerns in South America. CPO prices lost almost 65 per cent of its value in 2008 and are due for an upward correction in 2009.

CPO futures recovered quite sharply in line with our expectations. Though a bearish continuation pattern is still seen now with a possibility of testing 1200 Malaysian ringgit (MYR) a tonne levels, the short-term picture has turned bullish. Initial resistance will be seen at 1745-55 MYR/tonne region now. A daily close above this level should see a test of 1900 MYR/tonne initially, with a possibility to extend even higher towards 2200 MYR/tonne. However, failure to surpass, 1745-50 MYR/tonne could lead to fall lower again. Overall, we expect a bullish upward reaction to extend into January 2009, however, such corrective moves could exhaust itself soon and head lower towards 1200 MYR/tonne levels 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 1200 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 test the resistance levels.

Supports are at MYR 1562, 1509 and 1460. Resistances are at MYR 1685,1745 and 1900.

Gnanasekar .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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