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Malaysian palm oil futures ended higher on Friday helped by robust exports, firm energy and rising soya oil prices. Positive exports data boosted sentiment. Cargo surveyor Societe Generale de Surveillance said on Wednesday that exports of Malaysian palm oil products for December rose 22.2 per cent to 1,642,340 tonnes from November. Palm oil futures are expected to be choppy ahead a slew of data releases expected from the cargo surveyors, MPOB and USDA for the soya complex. Seasonal decline in palm oil production for the period January to March, and low prices of palm oil may lure more demand underpinning prices.

CPO futures are moving in line with our expectations. Initial resistance will be seen at 1745-55 Malaysian ringgit/tonne (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 2100 MYR/tonne, being a fibonnaci retracement point as seen in the chart above. However, failure to surpass, 1745-50 MYR/tonne could lead to fall lower again. And such a fall could find support again in the 1550-1600 MYR/tonne zone.

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 overbought zone now, indicating that a downward correction is possible. The averages in MACD have gone above the zero line of the indicator indicating a possible bullish reversal. Therefore, look for palm oil futures to test the resistance levels and correct lower.

Supports are at MYR 1705,1625 and1562. Resistances are at MYR 1755, 1865 and 1900.

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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