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Malaysian palm oil futures ended lower on Friday erasing gains made during the week, as crude and soya oil markets declined on US economic woes. Oil slipped below $90 a barrel during the week, as bleak economic data heightened concerns the US would slip into a recession and erode demand from the world’s biggest oil consumer. High prices are affecting demand and next week’s data from the cargo surveyor’s could weigh on prices further.

CPO active contract corrected lower as expected. However, prices structures point at one more shy at recent highs or even higher towards 3520 Malaysian ringgit (MYR) a tonne from where it could retreat decisively. As mentioned in the previous update, an extreme move towards 3852 MYR/tonne cannot be ruled out, but we do not favour that. Corrective moves should now find support at 3250 MYR/tonne and 3195 MYR/tonne respectively.

A new impulse began from 1427 MYR/tonne as per the recent wave counts. We could still be in the fifth wave impulse and not an end as mentioned in the previous update. We can expect a corrective A-B-C to begin now targeting 2895 levels or worst-case 2700 MYR/tonne. RSI is in the overbought zone indicating a correction to take place. The averages in MACD are above the zero line in the indicator indicating bullishness to be intact. Therefore, look for palm oil futures to test the resistance levels and then correct lower subsequently.

Supports are at MYR 3250, 3195 and 3148. Resistances are at MYR 3365, 3460 and 3526.

Gnanasekar .T

(The author is the Director of Commtrendz Research and also 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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