The Hindu Business Line : Palm oil may test resistance, dip

Malaysian palm oil futures rose to another new high on Friday, on expectations of Chinese buying to replenish vegetable oil reserves. Higher export taxes, talks of duty cuts in the Indian budget and a positive outlook for prices at the price outlook seminar in the coming week is expected to underpin and bolster prices higher. China, the world’s largest vegetable oils buyer, has actively bought US and South American soya oil to meet strong demand for the food while ex periencing its highest inflation in 11 years and damaged oilseed crops from a severe winter freeze. US soya oil futures have already notched record highs as a result.

CPO active contract moved higher as expected. Stemming from continued bullishness in the soy complex, CPO futures keeps posting new highs everyday. Being in uncharted territory, makes it difficult to look for past resistance and identify potential targets. A long-term target now comes in at 3865-3895 Malaysian ringgit (MYR) tonne range, which is twice the length of wave 1 in the bigger picture chart. Ideally, a correction should unfold from here. However, there could be inclination to test the psychological resistance at 4000 MYR/tonne having come this far. 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 anytime now targeting 3350 levels or worst-case 3041 MYR/tonne. RSI is in the extremely overbought zone indicating a correction in the offing. 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 3705, 3665 and 3554. Resistances are at MYR 3798, 3865 and 3928.

Gnanasekaar .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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