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Gnanasekar T.

Malaysian crude palm oil futures ended sharply lower as the dollar weakened against the ringgit making palm oil exports more costlier. This coupled with a fall in soya oil futures resulted in profit taking.

Better-than-expected exports data released by the cargo surveyors prompted speculative buying earlier in the week. Exports of Malaysian palm products for November fell 5 per cent to 1,359,790 tonnes from 1,430,900 in October, cargo surveyor Societe Generale de Surveillance estimated, against market expectations of a fall by 8 to 10 per cent.

CPO active February month contract corrected lower after testing some important resistance levels. A good correction is needed to fuel the momentum higher again and there are technical gaps to be filed on the way down.

The overall trend remains firm and in need of a fall to attract momentum buying. Near-term trend channel support is at 1850 Malaysian ringgit (MYR) a tonne followed by the 38.2 per cent fibonnaci retracement point at 1792 MYR/tonne which also coincides with a gap as seen in the chart above.

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 the powerful third wave impulse.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. Negative divergence is noticed in RSI leading to the fall. 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 1881 MYR/tonne and the 34-day period EMA is at 1764 MYR/tonne Therefore, look for palm oil futures to test the support levels.

Supports are at 1851, 1822 and 1785 ringgits. Resistances are at 1931,1949 and 2003 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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