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Malaysian palm oil futures edged lower on profit-taking and weekend position squaring. Despite, higher stocks and increasing production, prices have been moving in a broad consolidation with a bullish bias. Industry regulator Malaysian Palm Oil Board (MPOB) will announce the figures of production, stocks and exports on Tuesday. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance unveil Nov 1-10 palm oil export data for Malaysia on Tuesday too. Oi l fell sharply below $80 a barrel on Friday, as doubts about a recovery in oil demand outweighed positive economic signals. Though exports are expected to be steady, however it might not be enough to cut into palm oil stocks expected to hit record highs.

CPO futures rose higher against our expectations. Though prices broke the 2,250 Malaysian ringgit/tonne (MYR/tonne), it did not follow-through higher an indication of inherent weakness in prices. In the bigger picture though prices crossed an important long-term trend line resistance point at 2,250 MYR/tonne, but there are still no clear signs of bullishness ahead. We expect the active January contract to dip lower towards important support at 2,175 MYR/tonne or even lower. However, only a direct rise above 2,275 MYR/tonne could dent our bearish expectations.

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. This could be negated on a rise above 2,500 MYR/tonne and a fresh review of the wave counts. 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 bullish reversal. A cross over above the zero line again could indicate bearishness. Therefore, look for palm oil futures to test the support levels and rise higher again.

Supports are at MYR 2,227, 2,205 and 2173. Resistances are at MYR 2,265, 2300 and 2325.

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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