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Malaysian palm oil futures ended lower on Thursday easing from a 15-week high hit earlier in the session on some profit-taking in the energy and soya complex. CPO's large discount to soya oil contributed to gains during the week. This should underpin prices going forward too. Prospects of heavy rain cutting into production also lifted the market, which has gained 6.7 per cent since the previous week. Cargo surveyor Societe Generale de Surveillance reported that November1-25 palm oil exports rose 6.4 per cent to 1.18 million tonnes, driven by overseas demand. Commodities markets were rattled on Friday in the wake of fears over debt default by the Dubai government, that led to wave of profit-taking only to recover sharply in New York trade.

CPO futures are moving in line with our expectations. As mentioned earlier the big picture charts warned of strong bullishness ahead. However, overbought indications and exhaustion signs are evident, which warn of a minor correction or a broad consolidation before the next move begins, which could be a bullish one again. Crucial near-term support is at 2395-2,410 Malaysian ringgit (MYR) a tonne zone now, also being a rising trend line support. Favoured view now expects above mentioned supports to hold for push into the 2,585-2600 MYR/tonne zone. As always, this bullishness is subject to how the markets hold on to certain crucial supports. Important supports being, 2,421 MYR/tonne followed by 2,385 MYR/tonne. Only an unexpected decline below 2,265 MYR/tonne will force us to abandon our bullish view.

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 2,550 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 supports levels and then rise higher again.

Supports are at MYR 2,425, 2,385 and 2265. Resistances are at MYR 2,525, 2611and 2710.

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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