The Hindu Business Line : Corrective pattern in the making for palm oil

MALAYSIAN crude palm oil futures on MDEX closed lower Friday in reaction to fall in values of overnight CBOT Soyoil. Markets are also looking forward to the exports data for September 1-20 to be released on Monday. CPO futures jumped earlier this week after the market's main cargo surveyor, Societe Generale de Surveillance (SGS), reported a impressive 24 per cent jump in export of oil palm products at 6,75,647 tonnes for September 1-15 compared with August 1-15.

This week's market was also supported by a cut in base import prices of all edible oils by top buyer India. The move is seen a positive one as it will make edible oil cheaper for Indian importers ahead of an important festival season. The market turned negative after the Malaysian Palm Oil Board, which issues all official industry data, said break that stocks of palm oil at end-August stood at 12,56,518 tonnes, down just 2.72 per cent from July.

The third month active contract is finding it difficult to push higher with near-term resistance at 1,505-1,510 levels. Prices are moving in a rising channel as seen in the above chart.

Support gave away at 1,445 myr/tonne, which could now lead to a test of support levels. Initial support will be at 1,430 myr/tonne followed by the psychological support at 1,400 myr/tonne. A move below 1,380 will have bearish implications. Our view currently remains neutral and despite the recent fall in prices, we still believe there is scope for upside as long as 1,400 - 1,420 myr/tonne levels hold support. Wave counts haven't changed yet and they continue to track our line of expectations till now. One wave target near the 1,365 myr/tonne has already been met. The move to 2,003 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 1,368 myr/tonne can be confirmed only after a daily close above 1,600 myr/tonne.

RSI, is now in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD, are above the zero line in the indicator suggesting bullishness which is one of the main reasons for our continued up ward bias.

Current prices are near than the short-term 8 day EMA at 1,477 myr/tonne and the 34 day EMA is now at 1,476 myr/tonne. Look for prices to test the support levels. Supports, at, 1,430, 1,410 & 1,380 ringgits. Resistances, at 1,457, 1,465 & 1,485 ringgits.

(The author is associated with the Multi Commodity Exchange of India (MCX). The views expressed in this column are his own and not 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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