Palm oil futures may rise

Malaysian palm oil futures rose to their highest in a week on Monday as strong export demand put the contract on track for a second straight session of gains. CPO active month August futures moved on expected lines.

Prices could pull back towards resistances at 2,650-70 MYR/tonne followed by 2,725 again. Prices are heading right in that direction. Strong resistance will be noted around 2,688-90 for August, followed by 2,735-40, a fibonnaci retracement level.

It would appear difficult to cross this zone in the near-term and one can expect minor corrective declines from there. Any dips to 2,645-50 followed by 2,610 are expected to hold attempts to decline. As illustrated in the earlier updates, though, it looks like the short to medium-term has turned bearish, the bigger picture still favours bullishness ahead.

The big picture still indicates neutral tendencies and a chance of a revival in the bullish trend from critical support points. The current rally seems to suggest an upside in the coming sessions towards 2,735 with slight chances of even extending to 2,825-30 before fizzling out.

An unexpected fall and close below 2,590 could cause weakness temporarily, but could once again edge higher from there. Only a fall below 2,575 could force us to abandon our bullish view. Such a decline could expose the downside once again towards 2,420 or even lower, which is not our favoured view.

We will now reassess the wave counts, as prices have crossed over above 2,370-2,400.

A possible new impulse looks to have started again. One of our targets at 1,850 was met.

The rally from there looks very impressive.

As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,460 or even lower to 2,225 , and then subsequently rise towards a medium to long-term target at 3,600, which could bring this current impulse to an end.

The medium to long-term expectation that we have been having is slowly materialising and the impulse wave is underway. But, a short-term fall below 2,800 now has caused doubts on our overall bullish expectations.

We will have to closely watch the important resistances in the 2,900-3,000 range for any directional call going forward.

RSI is in the neutral zone now, indicating that it is neither overbought nor oversold.

The averages in MACD are still below the zero line of the indicator, hinting that the bearishness is still intact. Only a crossover again above the zero line could hint at a bullish revival now. Therefore, look for palm oil futures to test support levels and rise again.

Supports are at MYR, 2,645, 2,595 & 2,575. Resistances are at MYR 2,690, 2,725 & 2,745.

The writer is the Director of Commtrendz Research. There is risk of loss in trading.

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