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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday to multi-week highs lifted by a rise in crude oil prices.
Oil futures climbed more than $1 a barrel on Monday, after Saudi Arabia raised prices for crude sales to Asia for a second month, signalling better demand in the region. Markets are also keeping a watch on Indonesia’s plans to impose levies on its exports of CPO and processed palm oil to fund its biodiesel mandates. The levies may spur some initial demand for crude palm from the second largest producer Malaysia. However, prices might get capped as benign demand and a record soyabean harvest continues to pressure CPO futures.
CPO active month June futures are higher against our expectations. As mentioned in the previous update, till the support around MYR 2,125-35/tonne holds in the bigger picture, we are hopeful of a rise in the coming sessions. The present price structures suggest a move towards 2,280-2,300 levels, where good resistance will be seen.
The move could even extend higher towards MYR 2,395 levels too. But, such a move looks less likely till the resistance at 2,300 is cleared with high volumes. Supports are now seen at MYR 2,205/tonne followed by 2,175 levels.
Only a direct fall below MYR 2,140/tonne levels could hint at a failure to follow-through and such a move could revive bearish expectations again and revive hopes of a test of medium-term targets at 1,900 levels. Only a close above 2,280 levels could change the bearish picture to neutral in the bigger picture.
We will have to once again review the wave counts, but will wait for a crossover above MYR 2,400 per tonne to do that.
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 the final leg of an impulse in a declining trend with potential targets near MYR 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 below the zero line of the indicator hinting at a bearish reversal again. Only crossover again above the zero line could hint at a resumption of the bullish trend.
Therefore, look for palm oil futures to test the resistance levels.
Supports are at MYR 2,205, 2,175 and 2,125. Resistances are at MYR 2,250, 2,280 and 2,305.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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