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Malaysian palm oil futures ended sharply higher on Friday on support from soya oil and energy prices, which prompted strong buying in the physical markets. The large discount against soya oil is also boosting sentiment. Exports have also been robust ahead of the festival season. However, stocks are at an all-time high and exports need to rise more sharply to ease pressure on rising stocks. Cargo surveyor SGS estimated exports at 1.11 million tonnes during the previous-mont h 25-day period.

CPO has moved in line with our expectations. As mentioned in the previous update, there were lots of indications that we could see a smart pullback going forward. And we saw a rise higher towards 2753 Malaysian ringgit/tonne. We could now see a consolidation between 2600 MYR/tonne and 2775 MYR/tonne and then rise towards 2865 MYR/tonne followed by 2950 MYR/tonne and in an extreme case towards 3065 MYR/tonne. The weekly bar now indicates that a possible intermediate lows has been made and dips to 2600 and 2555 MYR/tonne could find support and rise higher subsequently.

Fall below 2495 MYR/tonne could cause doubts on the upside potential. A new impulse began from 1427 MYR/tonne and this could be the third wave, which has not ended so far.

We can expect a corrective fourth wave in the form of A-B-C in progress now. Believe we could be in a wave “C” with possible targets extending to 2250 MYR/tonne. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator indicating a bearish reversal. Therefore, look for palm oil futures to test the support levels and rise higher subsequently.

Supports are at MYR 2670, 2600 and 2545. Resistances are at MYR 2775, 2865 and 2950.

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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