The Hindu Business Line : Palm oil could test resistance

Malaysian crude palm oil futures ended higher lifted by a sharp decline in palm oil stocks and a steady increase in exports. CPO active July contract moved perfectly in line with expectations. With the indicators still displaying highly overbought conditions, a good corrective dip is in the offing. As expected supports at 2240 Malaysian ringgit (MYR) tonne levels held well and the rally could continued higher towards 2352 MYR/tonne levels. Further upside can be seen towards 2465-80 MYR/tonne levels.

A daily close below 2240 MYR/tonne will be the first sign of major correction to begin.

We are in the fifth wave move of that impulse. We can expect a corrective A-B-C to take place in the coming weeks. The averages in MACD are still above the zero line in the indicator suggesting bullishness to be intact. Prices are above the short-term 8-day period EMA at 2218 MYR/tonne and the 21-day period EMA is at 2158 MYR/tonne. Therefore, look for palm oil futures to test the resistance levels and then correct lower sharply.

Supports are at MYR 2310, 2278 and 2240. Resistances are at MYR 2379, 2400 and 2452.

(The author is a director at 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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