Malaysian palm oil futures on the Bursa Malaysia Derivatives Exchange fell on Monday to their lowest level in more than four months due to weak soya oil prices and weak exports. Prices in May dropped nearly 8 per cent, the largest monthly decline since September 2012 hurt by a stronger ringgit and a weak soya complex.

Cargo surveyor Intertek Testing Services reported that a total of 1,315,952 tonnes of Malaysian palm oil products were shipped in May, 7.8 per cent higher month-on-month, but slower than the 23 per cent jump recorded during May 1-15. This weakness was despite energy prices continuing to rule above $100/bbl mark, which normally is considered supportive for edible oil complex.

Crude palm oil active month August futures fell lower as expected. As mentioned in the previous update, in the bigger picture, we still expect prices to fall again back below Malaysian ringgit (MYR) 2,485 a tonne targeting MYR 2,455 or even lower to MYR 2,425-30 levels. Highly oversold conditions warn us of an upward retracement in the coming days. But the pullback could at the most be a profit-taking rally, and the decline could resume and test levels close top MYR 2,375, or even lower to MYR 2,348-50 being a wave equality target level. Pullbacks should find it difficult to cross MYR 2,480-85 levels now or maximum MYR 2,500 levels. Only a rise above MYR 2,526 could receive bullish hopes again.

As mentioned earlier, prices met an intermediate wave target at MYR 2,135 and corrective decline to MYR 2,345-50 levels, followed by a sharp third wave move to MYR 2,575-2,600 materialised. Price structures suggest a possible third wave move ending at MYR 2690 and a corrective, fourth wave with targets at MYR 2450 now. The fifth wave possibly ended at MYR 2898 and a corrective A-B-C in progress with an equality target at MYR 2350 levels now. RSI is in the oversold zone indicating a possible upward correction in the offing. The averages in MACD are below the zero line of the indicator hinting at a bearish reversal. Only a crossover again above the zero line could at resumption in the bullish trend.

Therefore, look for palm oil futures to test the resistance levels initially and then decline again.

Supports are at MYR 2375, 2345 and 2300 Resistances are at MYR 2455, 2485 and 2525.

(The author is the Director of Commtrendz Research and also in the advisory panel of Commodity exchanges and corporate houses) The views expressed in this column are his own. This analysis is based on the historical price movements and there is risk of loss in trading.)

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