Malaysian palm oil futures on the Bursa Malaysia Derivatives ended sharply higher on Monday boosted by a rate cut in China and a weaker ringgit further underpinned prices.

A weaker ringgit tends to make physical prices attractive for buyers thereby restocking demand. The gain in prices came despite a drop in exports from the world’s second-biggest producer. Exports of Malaysian palm oil products in February fell 14.5 per cent to 953,053 tonnes from 1,114,642 tonnes shipped in January, cargo surveyor Intertek Testing Services (ITS) said.

CPO active month May futures moved in line with our expectations. As mentioned in the previous update, the fall to MYR 2,216/tonne levels does not indicate weakness yet, and it is more likely that prices could find support in the 2,195-2,210 levels and edge higher again.

A clear break and close above 2,321 has increased the positive momentum and prices are more likely to test the important resistance near MYR 2,395/tonne or even higher to 2,425-35 levels. Chances even exist for a push higher towards the psychological resistance at MYR 2,500/tonne levels.

This also happens to be the fibonacci retracement level in the near-term. Immediate supports are seen at 2,345 followed by 2,265 levels being a trend line support point. Only an unexpected decline below 2,245 could push prices further lower towards 2,200, which is not our favoured view.

We will have to once again review the wave counts, but will wait for a crossover above MYR 2,400 a tonne 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 2,175 levels. This once again puts the spot light 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 1,850 or even lower to 1,700 levels. 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 test resistance levels.

Supports are at MYR 2,345, 2,300 and 2,265. Resistances are at MYR 2,395, 2,425 and 2,495.

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

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