The Hindu Business Line : Downward tweak likely in palm oil

Malaysian crude palm oil futures ended marginally higher as the drop in the export estimates turned out to be smaller than expected. Cargo surveyor closely watched by the market, Societe Generale de Surveillance, said exports fell 24 per cent to 503,097 tonnes from 661,932 shipped between November 1 and 15.

On Tuesday the Malaysian Palm Oil Board (MPOB) reported an unexpected 5.03 per cent rise in November stocks leading to a sharp fall in prices. A sharp fall in CBOT soya oil futures will pressure CPO futures in the coming week.

CPO active March month contract corrected lower as expected. A consolidation between 1825 Malaysian ringgit (MYR) a tonne to 1935 MYR/tonne can be seen in the coming week. Also, interesting to note is the possibility of a near double top under formation. Break and a daily close below 1825 MYR/tonne will hint at a sharp fall towards 1740 MYR/tonne or even lower to 1685 MYR/tonne being fibonacci retracement levels.

Important near-term support is at 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. The averages in MACD are above the zero line in the indicator suggesting bullishness to be intact. Prices are below the short-term 8-day period EMA at 1878 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1813 MYR/tonne.

Therefore, look for palm oil futures to head lower and test the support levels.

Supports are at 1827, 1798 and 1737 ringgits. Resistances are at 1878, 1906 and 1949 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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