Crude Palm Oil (CPO) price, which was surging since last November, is under pressure. The CPO futures contract price on the Bursa Malaysia Derivatives Exchange had been stuck in a sideways range between MYR 3,150 per tonne and MYR 3,335 since January.

The contract declined sharply breaking below a key support at MYR 3,200 last week, thereby turning the outlook bearish. It is currently trading at around MYR 3,024.

On the domestic front, the CPO futures contract on the Multi Commodity Exchange (MCX) tested a key resistance at around ₹600 per 10 kg in late January and has tumbled over 8 per cent to the current level of ₹549. Strong rupee has also aided in dragging the MCX-CPO prices lower.

Outlook: The short-term view is negative for CPO. The Malaysian CPO futures contract can fall to MYR 2,800 per tonne if it declines below the immediate psychological support at MYR 3,000. The contract needs to rise strongly above MYR 3,200 to ease the downside pressure. However, the outlook will turn positive only if it breaches above ₹3,335 decisively. The next target will be MYR 3,400.

On the domestic front, the recent reversal from ₹600 is very significant. Since mid 2016, the MCX-CPO contract has been broadly range bound between ₹500 and ₹600. The sharp reversal from ₹600 keeps the ₹500-₹600 sideways range intact. Immediate support is at around ₹540. A strong break below this support may drag the MCX-CPO contract lower to ₹500 in the coming weeks.

Strong resistance is in the ₹570-₹580 zone which is likely to cap the upside in the short term. Intermediate rallies to this resistance zone might see fresh selling interest coming into the market.

Short-term traders with a high-risk appetite can make use of intermediate bounce to ₹560 to initiate short positions. Accumulate shorts if the contract rises further to ₹570. Keep the stop-loss at ₹587 for the target of ₹515.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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