The Hindu Business Line : Palm oil may test support levels

MALAYSIAN crude palm oil futures on MDEX closed lower on Friday in reaction to continuous fall in values of overnight CBOT soya oil. Markets are awaiting exports data for September 1-25 figures, due from cargo surveyors ITS and SGS.

Bearish outlook on supply/demand by private forecaster, Mr Ivan Wong added to the negative sentiment. Mr Ivan Wong, the market's main forecaster, said on Tuesday he expected exports in September to be little changed from August's official tally of 1.22 million tonnes. Production was, however, expected to rise up to 1.42 million tonnes from 1.32 million tonnes in August. Stocks of palm oil at end-September could also be as high as 1.34 million tonnes from 1.26 million tonnes at end-August.

Reports of a smaller Indian 2004 kharif oilseed crop, estimated at 154.5 lakh tonnes against last kharif's 170 lakh tonnes, due to erratic monsoon rains failed to provide support.

The third month December active contract failed to hold on to key support levels. As mentioned earlier support gave away at 1445 Malaysian ringgit/tonne, which will lead to a test of lower levels. One last long-term support point at 1399 MYR/tonne is worth watching, which happens to be the long-term rising trend line point.

Should this level hold support, and then there is a minor chance of a pullback towards the 1500 MYR/tonne levels. However, the current price structures do not favour an up move and a daily close below 1380 MYR/tonne will lead to a sharp fall.

Our view currently remains neutral now and only if 1395-1400 MYR/tonne levels hold and close above 1465 MYR/tonne we will get bullish on the market again. 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. We will watch the price movements next week for altering the wave counts.

RSI is now in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD, have gone below the zero line in the indicator suggesting bearishness which is one of the main reasons for giving up our upside bias.

Current prices are near than the short-term 8-day EMA at 1438 MYR/tonne and the 34-day EMA is now at 1462 MYR/tonne. Look for prices to test the support levels. Supports at, 1410, 1399 and 1380 ringgits. Resistances at 1434, 1443 and 1457 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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