The Hindu Business Line : Palm oil may consolidate, rise

MALAYSIAN crude palm oil futures on MDEX closed lower on Friday due to weakness in CBOT soya oil values. Markets are keenly awaiting the export estimates of palm oil for July 1-25 due from the two cargo surveyors on Monday.

Societe Generale de Surveillance (SGS), the cargo surveyor whose figures are more closely watched, estimated that July 1-20 exports were at 704,061 tonnes compared to 629,233 tonnes, it estimated for June 1-20. Recovery was seen in crude palm oil futures after prices hit a low of 1368 Malaysian ringgit (MYR) a tonne last week due to better export performance.

A neutral crop report from Mr Ivan Wong added comfort to a market already buoyed by friendly exports data for July 1-20. Mr Wong, the industry's top crop forecaster, put palm oil output for July at 1.26-1.27 million tonnes, slightly lower than his earlier estimate of 1.28-1.29 million tonnes. However, he raised his forecast for July closing stocks to 1.32-1.33 million tonnes, against his previous estimate of 1.31-1.32 million tonnes.

The third month active contract moved higher in line with our expectations but the fall from its recent highs has been sharper than we envisaged. Prices moved up to 1503 MYR/tonne only to find strong resistance there. Important support at 1450 MYR/tonne was broken with considerable ease, which does not happen in a clear trend.

Our view now remains neutral, with a bias towards the up side as long as 1400-05 levels hold. Resistance will now be between 1450-57 MYR/tonne. Preferred view still is to look for the support levels to hold for an initial move to 1535 MYR/tonne level and possibly higher from there to 1615 MYR/tonne levels, which is the fibonnaci 38.2 per cent retracement level for the move from 2003 MYR/tonne to 1368 MYR/tonne.

One wave target near the 1365 MYR/tonne has already been met. The move to 2003 MYR/tonne is the end of the fifth wave impulse and a move lower from there is a corrective A-B-C pattern in the making. A new impulse from the low of 1368 MYR/tonne can be confirmed only after a daily close above 1520 MYR/tonne.

RSI is now in the neutral zone indicating that it is neither oversold nor overbought. 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.

Positive divergence in the indicators is one of the important reasons for our upward bias. Current prices are lower than the short-term 8-day EMA at 1448 MYR/tonne and the 34-day EMA is now at 1500 MYR/tonne. Look for prices to consolidate and head higher. Supports, at, 1420, 1400 and 1380 ringgits. Resistances, at 1457, 1480 and 1535 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 He can be reached at gnanasekar_thiagarajan@yahoo.com.)

More Stories on : Technical Analysis | Oilseeds & Edible Oil

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

Stories in this Section
Rubber may not dip below Rs 50 a kg

Palm oil may consolidate, rise

NDDB pact with AP to develop dairy sector