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

Malaysian crude palm oil futures ended flat on Friday on disappointment over exports and falling energy prices. Exports of Malaysian palm products for September 1-15 stood at 552,866 tonnes, 12 per cent lower for the same period in the previous month.

The market has been declining since Monday, when the industry regulator Malaysian Palm Oil Board (MPOB) surprised the trade when it released August data showing palm oil stocks at record levels. Festival season demand and a recovery in energy prices should help CPO futures to regain its strength in the coming weeks.

CPO active November month futures moved perfectly in line with our expectations. Prices also found excellent support at 1517 Malaysian ringgit (MYR) a tonne level and a move above 1551 MYR/tonne will take prices higher to 1578 MYR/tonne, where it is expected to find strong resistance.

Unexpected fall below 1517 MYR/tonne has the potential to fall to 1485 MYR/tonne levels, which happen to be the long-term trend line support point and subsequently resume the up trend. 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 below the zero line in the indicator suggesting bearishness. Prices are below the short-term 8-day period EMA at 1545 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1574 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and fall lower again.

Supports are at 1527, 1504 and 1485 ringgits. Resistances are at 1551, 1578 and 1602 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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