The Hindu Business Line : Palm oil may test resistance, rise

CPO futures have been holding well in spite of soya oil futures trading in a difficult range. Soya oil futures rebounded marginally from recent lows on hurricane fears in the West Asia. On the fundamental side, markets will look forward to data from MPOB in the coming weeks.

Energy futures are on the rise and expected to rise further on supply concerns. This factor coupled with the upcoming festival demand in India should lend good support to palm oil.

The third month active November contract rose higher after finding support at the important 1,365 Malaysian ringgit (MYR) a tonne level. Another important support is at 1,353 MYR/tonne levels.

Only a daily close below 1,320 MYR/tonne will negate any bullish expectations we have had till now and test the psychological 1,300 MYR/tonne or even lower.

Prices are expected to test the trend line resistance point near 1,415 MYR/tonne immediately, which also coincides with the 200-day EMA level.

Only a daily close above the fractal top of 1,446 MYR/tonne will be seen as a sign of resumption in the bullish trend. Our favoured view still is to look for the support levels to hold and rise higher.

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. The correction ended at 1,252 MYR/tonne.

We are possibly in a new impulse with the first wave of the impulse ending at 1,504 MYR/tonne and the second wave in progress. A strong third wave is to begin anytime soon.

RSI is in the neutral zone now also displaying a positive divergence another reason for last week's pullback. The averages in MACD are still below the zero line in the indicator suggesting bearishness.

Only a crossover of the averages above the zero line again will signal a clear bullish reversal.

Prices are above the short-term 8-day period EMA at 1,376 MYR and the 34-day period EMA is at 1,379 MYR/tonne Therefore, look for prices to test the resistance levels and rise higher.

Supports are at MYR 1,378, 1,365 and 1,353. Resistances at MYR 1,397, 1,408 and 1,415.

(The author is associated with The Multi Commodity Exchange of India Ltd. The views expressed in this column are his own and not necessarily of MCX. This analysis is based on historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

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