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Crude palm oil futures on Bursa Malaysia Derivatives Exchange ended higher on Monday, encouraged by Malaysia’s announcement that it would not reinstate export tax on palm for March. Release of better-than-expected export figures also aided the trend. Malaysia has kept its palm oil export tax at zero, a Government circular showed, extending its duty-free policy since October to buoy exports.
Exports of Malaysian palm oil products for February 1-15 fell 4.9 per cent to 508,955 tonnes from the same period in January, cargo surveyor Intertek Testing Services said on Monday. Another cargo surveyor, SGS, estimated exports of Malaysian palm oil products for February 1-15 fell 6.3 per cent to 510,832 tonnes from 545,410 tonnes shipped during January 1-15.
CPO active month May futures are higher in line with our expectations. As mentioned in the previous update, a rise above MYR (Malaysian ringgit) 2,285 a tonne will revive bullish hopes again in the coming sessions. Prices took support at MYR 2,270 levels and are consolidating to move higher again. Any down moves could find initial support at MYR 2,285 followed by strong support at MYR 2,245-50 levels.
Initial resistance is at MYR 2,345-50 levels. While above mentioned support holds, we can initially expect prices to edge higher towards the previous high of MYR 2,395-2,400 or even higher towards MYR 2,420-30 MYR/tonne. Subsequently, we expect prices to grind lower again towards MYR 2,225-2,230 levels, followed by MYR 2,175 which is a strong trendline support point. This is the favoured view. Unexpected move above MYR 2,430 could take prices even higher subsequently.
We will have to once again review the wave counts, but will wait for a crossover above MYR 2,400 to do that. Till then, we will stick to our earlier assessment. As mentioned earlier, a downtrend again could be confirmed on a close below MYR 2,175 levels. This once again puts the spotlight on the MYR 1,700-tonne-mark, which we anticipated earlier. We are now tracking a final leg of an impulse in a declining trend with potential targets near MYR 1,850 or even lower to MYR 1,700 .
Ideally, the next leg of a larger upmove could potentially begin from this area. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal again. Only crossover again below the zero line could hint at a resumption of the bearish trend.
Therefore, look for palm oil futures to consolidate and rise again.
Supports are at MYR 2,285, 2,245 and 2,200. Resistances are at MYR 2,355, 2,395 and 2,425.
The author is the Director of Commtrendz Research and there is risk of loss in trading.
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