The Hindu Business Line : Palm oil may rise higher

Export estimates are due on Monday from cargo surveyors Societe Generale de Surveillance (SGS) and Intertek Testing Services (ITS). SGS, which is more closely watched of the two, said earlier this week it had estimated a 9 per cent rise in Sept. 1-20 exports from a month ago.

Export demand for palm is also seen strong in the coming months ahead of the festival seasons in India, Pakistan and West Asia. However, a surge in production levels and higher carry-over stocks is expected to curb major advances on the up side. Surge in overnight CBOT soya oil futures this week owing to weather concerns also helped sentiment in palm.

The Government-run Malaysian Palm Oil Board will release on Oct. 10 official production, export and closing stocks figures for September.

The third month active front month contract moved as per our expectations. Prices have crossed the important 200-day EMA level and the trend channel resistance point at 1408-10 Malaysian ringgit/tonne. This should support declines in the coming sessions. Stronger support is at 1395 MYR/tonne. However only a daily close above the fractal top of 1448 MYR/tonne will be seen as a sign of resumption in the bullish trend. This move could once again bring in to discussion the inverse head and shoulder pattern we identified few months back.

As long as 1378-80 MYR/tonne holds the downside, expect CPO futures to continue rising higher. 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. The correction ended at 1252 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 overbought zone indicating a possibility of a correction lower.

The averages in MACD are above the zero line in the indicator suggesting a bullish reversal. Prices are above the short-term 8 period EMA at 1411 and the 34 period EMA is at 1392 MYR/tonne. Therefore, look for palm oil futures to correct lower initially and then rise higher again.

Supports are at MYR 1408, 1395 and 1378. Resistances at MYR 1432, 1446 and 1453.

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