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Malaysian palm oil futures ended higher on Wednesday supported by firm soya oil price and boosted by the intention of Indonesia to raise the export tax on CPO. Stock building ahead of the Chinese New year was also seen as a supportive factor for prices. The palm oil market was closed on Thursday and Friday on account of Chinese New year holidays.

CPO active contract shows exhaustion signs and possibility of an intermediate top in place. Resistance in the 3400-3415 Malaysian ringgit/tonne is now expected to cap upside gains for a fall towards 3145 MYR/tonne. A daily close below 3145 MYR/tonne could open the downside further for a sharp correction lower targeting 2985 MYR/tonne or even lower. However, a direct rise above 3440 MYR/tonne could dent our bearish expectations taking prices to another important technical target at 3526 MYR/tonne, which we do not favour. 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 neutral zone indicating that it is neither overbought nor oversold. 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 3345, 3275 and 3145. Resistances are at MYR 3410, 3470 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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