The Hindu Business Line : Palm oil in new corrective phase

MALAYSIAN crude palm oil futures on MDEX ended slightly higher with market players awaiting the release of the February 1-15 export data to be released next week by cargo surveyors SGS and ITS.

Markets expects the export Exports figures to be lower. This factor has even made the market ignore some of the gains made this week by rival soya oil. Selling pressure emerged after the market's main cargo surveyor, Societe Generale de Surveillance (SGS), reported earlier this week that exports for February 1-10 stood at 212,297 tonnes, down from 282,235 tonnes for January 1-10.

Market also ignored bullish crop data from the Malaysian Palm oil board. MPOB said exports for last month were at 854,077 tonnes, down 9.29 per cent from 941,508 tonnes in December. It said Malaysia's crude palm oil output fell 6.43 per cent to 862,996 tonnes in January from 922,325 tonnes in December.

Palm oil stocks at the end of last month were down 3.23 per cent to 1.1 million tonnes from 1.14 million tonnes at end-December.

The active contract has found excellent support at around 1580 Malaysian ringgit n(MYR) a tonne levels. A rapid fall expected has not taken place and the trend line support seems to be holding. A close under 1560 MYR/tonne will confirm the start of a bearish rally on palm oil futures. However, if current levels do hold then a test of 1630 MYR/tonne again cannot be ruled out in the coming week.

Immediate support at 1580 MYR/tonne, followed by the Fibonacci 38.2 per cent support at 1560 MYR/tonne. An impulse fifth wave looks to have ended at 1690 MYR/tonne and a new corrective phase has begun.

We are probably coming close to the end of wave "A". This will be confirmed if prices rebound and head higher to 1630 MYR/tonne again. However, if prices were to continue its downtrend, then we could still be in wave "A".

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line in the indicator convincingly showing weakness. Current prices are below the 9 and 25 day EMA, which again indicates bearishness. Look for prices to hold at support levels and then head lower. Resistance at 1603, 1612 and1636 ringgits. Supports at 1582, 1560 and 1537 ringgits.

(The author is a trader at ScotiaBank and the views expressed by him are his own and not necessarily that of his employe. This analysis is based on historical price movements and there is risk of loss on trading.)

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