The Hindu Business Line : Palm oil may test support level, rise

The third month active front month contract moved higher as expected. Prices shot higher after breaking the important trend line resistance at 1,490 Malaysian ringgit (MYR) a tonne. Important support is now at 1,478 MYR/tonne followed by 1,447 MYR/tonne and these levels would tend to support declines in the near-term.

We expect prices to correct lower in the coming sessions and then slowly edge higher towards 1,566 MYR/tonne in the coming months or even higher towards 1,600 MYR/tonne. Only, an unexpected move below 1,408-10 MYR/tonne can cast doubts on our overall bullish view.

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. We are possibly in a new impulse with the first wave of the impulse ending at 1,504 MYR/tonne and the second wave ending at 1,329 MYR/tonne.

We can now expect the explosive third wave to begin. Unexpected break below 1,400 MYR/tonne, will force us to abandon this count. RSI is in the neutral zone indicating that it is neither overbought nor oversold. It is also showing a negative divergence hinting at a corrective fall.

The averages in MACD are above the zero line in the indicator suggesting bullishness. Prices are below the short-term 8-day period EMA at 1,490 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1,466 MYR/tonne. Therefore, look for palm oil futures to test the support levels and rise higher again. Supports are at MYR 1,478, 1,447 and 1,434. Resistances at MYR 1,500, 1,523 and 1,566.

(The author is associated with the Multi Commodity Exchange of India Ltd. 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.)