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Malaysian palm oil futures ended higher on Friday but came off its highs due to weekend profit-taking on expectations that exports could be weak for January. The fall in Malaysia’s palm oil production and inventories in December is also supportive of prices.

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. As expected a daily close above 1745-55 Malaysian ringgit (MYR/tonne) resulted in the test of our anticipated resistances. Initial support is at 1865 MYR/tonne followed by crucial support at 1750 MYR/tonne now.

We can expect these supports to hold and rise higher again. However, failure to find support at 1745-55 MYR/tonne could result in a fall once again. As mentioned earlier, we expect a bullish upward reaction to extend into January 2009, however, such corrective moves could exhaust itself soon and head lower 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 overbought nor oversold. 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 1865,1745 and1645. Resistances are at MYR 1955, 2058 and 2102.

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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