The Hindu Business Line : Palm oil futures may consolidate

MALAYSIAN crude palm oil futures on MDEX closed lower on Friday unable to sustain gains made during the day. A stronger close in overnight Chicago soya oil provided psychological support but profit taking erased all the gains made during the day.

Prices are expected to be range-bound till fresh leads into crop data next week. Markets will look forward to the scheduled release of the reputed private forecaster Mr Ivan Wong's supply/demand for palm oil from June till August.

His earlier report put production for this month at 1.2 million tonnes against the official figure of 1.1 million tonnes for May and closing stocks at 1.20-1.21 million tonnes. Dismal performance in exports is also weighing on the markets.

Societe Generale de Surveillance (SGS), the market's main cargo tracker, released a bearish report on June exports, putting the tally at 956,003 tonnes versus May's 953,781 tonnes. The latest figure was also 15 per cent lower when compared to SGS's estimate of 1.12 million tonnes for June 2003.

The third month active contract could not follow through and head higher against our expectations. Failure to hold support at 1475 Malaysian ringgit (MYR) a tonne will set the tone for a test of the near term target at 1335-50 MYR/tonne levels, a falling trend line channel point. However, if 1480-1500 MYR/tonne holds, there is still a good possibility of the move to extend higher above 1600 MYR/tonne levels again.

We have been adopting a bearish outlook as the weekly charts turned bearish at 1930 MYR/tonne levels based on divergences in indicators, moving average cross-over and elliot wave structures. We would prefer to wait for the coming week to provide any clues on the wave counts from here. The move to 2003 MYR/tonne is the end of the fifth wave impulse and a move from there is a corrective A-B-C pattern in the making.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. A positive divergence is now seen where prices have made a lower low, which is not confirmed by a lower low in the indicator. The averages in MACD are still below the zero line in the indicator suggesting bearishness. Only a crossover above the zero line will indicate a trend reversal. Positive divergence is noticed in MACD too.

Current prices are lower than the short-term 8-day EMA at 1535 MYR/tonne and the 34-day EMA is now at 1581MYR/tonne. Look for prices to consolidate and test the support levels. Supports, at, 1500, 1485 and 1450 ringgits. Resistances, at 1535, 1567 and 1600 ringgits.

(The author is associated with the Multi Commodity Exchange of India (MCX). The views expressed in this column are his own and not that of his employer. This analysis is based on the historical price movements and there is risk of loss in trading.)

More Stories on : Technical Analysis | Oilseeds & Edible Oil

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
NCDEX deploys 500 VSATs for online commodity trading

Time to invest in commodities: Experts

Chidambaram to make field visits to monitor farm credit flow

Farm credit viable only if given on time: Nabard chief

Tea import bill up by Rs 9 crore

Palm oil futures may consolidate

Base metal prices likely to rise in Q4