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Gnanasekar. T

Malaysian crude palm oil futures ended higher on Friday boosted by strong export estimates from the cargo surveyors. Exports of Malaysian palm oil products in August stood at 1,367,456 tonnes, up 12.8 per cent from the 1,211,764 tonnes shipped in July. A firm trend in CBoT soya oil prices is also seen supporting CPO futures.

Energy prices corrected quite sharply and this might limit the upside potential for palm oil futures as it has been tracking energy markets for direction lately.

However, the upcoming festival demand will underpin CPO futures and will see bargain hunters emerge at all corrective dips. CPO active November month futures bounced off from the support levels in line with our expectations.

Good resistance will be seen at 1626 Malaysian ringgit (MYR) a tonne levels and only a break of this level will trigger further bullishness towards 1670 MYR/tonne or even higher.

Crucial support for the up trend is at the recent breakout point of 1521 MYR/tonne. As long as the long-term trend line support at 1477 MYR/tonne holds, we stick to our long-term target of 1765 MYR/tonne. We will continue to stick with the same favoured wave counts.

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 are now in a new impulse with the first wave of the impulse ending at 1,504 MYR/tonne and the second wave ending at 1329 MYR/tonne.

With the way prices have shot, it makes us believe that the third wave is in progress.

RSI is 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 to be intact. Prices are above the short-term 8-day period EMA at 1591 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1596 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and correct lower again.

Supports are at 1556, 1521 and 1502 ringgits. Resistances are at 1602, 1626 and 1652 ringgits.

(The author is the director of Commtrendz Research and in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that 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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