Malaysian palm oil futures on Bursa Malaysia Derivatives exchange ended higher on Friday, the highest in a month on Friday on hopes of export demand paring record stocks. Despite weak market sentiment on the back of concerns about a possible debt default by Cyprus that could hit the euro zone’s fragile recovery and crimp edible oil demand, prices rallied higher. Data this week lifted expectations of market participants that exports of palm oil will climb and help ease the 2.44-million-tonne stock build up in Malaysia, the world's No.2 producer of the edible oil. Cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd said that March 1-20 shipments showed a monthly gain of 11 per cent and 14 per cent, respectively. China’s February palm oil imports rose 10.5 per cent on year to 423,831 tonnes, the General Administration of Customs said Thursday. Imports in the first two months rose 8.5 per cent on year to 896,564 tonnes, it said.
CPO active June month futures pulled back higher as expected. As mentioned earlier, strong resistance will be seen at 2,500-2,520 Malaysian ringgit (MYR) a tonne levels and though it looks unlikely to cross it in the near-term, indicators are slowly turning friendly. A close above 2,525 could take prices towards trend line resistance at 2,580-85 , a strong resistance point. Only an unexpected decline below 2,355 could see prices testing the important levels near 2,285 , or even lower to 2,210 which we do not favour presently. In the coming week, chances exist for the rally to extend towards 2,525 levels or even higher to 2,585 while supports in the 2,465 followed by 2,435 holds.
The extended correction to 2,200 levels materialised in the form of an extended wave “C”. It looks like a possible wave “C” could have ended at 2,220 now. For the present impulse move once above 2,650 , potential exists for the impulse rally to extend to 2,755-2,800 range too. Only an unexpected decline below 2,350 could force us to abandon our bullish view. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at weakness. Only a crossover above the zero line again could indicate a bullish reversal.Therefore, look for palm oil futures to test the resistance levels.
Supports are at MYR 2,460, 2,430 and 2,365. Resistances are at MYR 2,525, 2,585 and 2,620.
(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at firstname.lastname@example.org.)