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Malaysian palm oil futures ended sharply higher on Friday helped by strength in the energy complex and rival soya oil. Cargo surveyors were expected to announce their estimates for July 1-20 Malaysian palm oil exports next week. Markets are expecting friendly export numbers to boost sentiment. Exports of Malaysian palm oil products during July 1-15 rose 14.6 per cent to 6,53,474 tonnes from 5,70,187 tonnes shipped between June 1 and 15, cargo surveyor Societe Generale de S urveillance said on Wednesday. However, fears of higher production and rising production could come to haunt the market again.

CPO Active September futures pulled back higher in line with expectations. Resistances are in the 2,250-2,290 Malaysian ringgit a tonne MYR/tonne zone now being a trendline resistance level as seen in the chart above. Possibility of an extension towards 2,350 MYR/tonne cannot be ruled out. Sustained bullishness can only be seen on daily close above 2,425 MYR/tonne now.

In the bigger picture though it looks as though any pullback rallies could find itself difficult to sustain and could be sold-off dragging prices lower towards 1,895 MYR/tonne or even lower towards 1,833 MYR/tonne. A new impulse began from 1,427 MYR/tonne and this could be the third wave, which has at 4,486 MYR/tonne.

A prolonged corrective fourth wave in the form of A-B-C is in progress now.

A possible wave “C” could have begun with possible targets extending even lower towards 1,200 MYR/tonne.. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. Positive divergence is also seen as a bullish factor.

The averages in MACD have gone below the zero line of the indicator indicating a bearish reversal. Only a crossover above could once again begin a bullish trend. Therefore, look for palm oil futures to test the resistance levels and correct lower again.

Supports are at MYR 2,100, 2,031 and 1,985. Resistances are at MYR 2,195, 2,270 and 2,350.

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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