Malaysian palm oil futures on the Bursa Malaysia Derivatives exchange ended higher on hopes of a recovery in demand ahead of the festival period. However, for the week, CPO futures closed almost flat, as concerns over record stocks offset expectations of stronger demand. Market players will be watching out for exports numbers during October 1-20 to further gauge demand trend, after both cargo surveyors reported an increase in exports for the first half of the month. Energy prices tumbled below $90 a barrel after midday Friday on the broad economic concerns that sent equities skidding and the dollar higher.
CPO active month futures are higher in line with our expectation. Prices have been gradually inching higher, but the overall bearish bias still persists. Price structures warn of a decline lower towards Malaysian ringgit (MYR) 2,345-2,350 a tonne levels initially or even lower to MYR2,210 a tonne in the coming sessions. Decline below MYR2,465 a tonne could open the downside once again. As we focus on near-term bearishness, in the medium to long term, there is a good possibility of a return near MYR3,000 a tonne or even higher. Immediately, while MYR2,500-2,530 a tonne caps upside attempts, a decline lower to above mentioned levels look likely. Unexpected rise above MYR2,545 a tonne could hint that the expected decline might not take place.
The wave counts remain mixed with no clarity at all on long-time direction. As mentioned in the earlier update, we will give up the expectation of an impulse still in progress on a daily close below MYR2,675 a tonne and such a fall could target MYR2,400 a tonne at least. A possible wave ‘C’ is now in progress with potential targets in the MYR2,350-2,375-atonne range, which has been broken and looks like it could extend to MYR1,975-1,995 a tonne also. Ideally, a new impulse could begin from lows near MYR1,995-2,050 a tonne levels. The relative strength index is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting at bearishness to be intact.
Therefore, look for palm oil futures to test the support levels.
Supports are at MYR2,425, MYR2,350 and MYR2,300. Resistances are at MYR2,525, MYR2,545 and MYR2,600.
(The author is the Director of Commtrendz Research and on the advisory panel of Multi Commodity Exchange of India Ltd. The views expressed are personal. This analysis is based on historical price movements and there is risk of loss in trading. He can be reached at email@example.com.)