Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher and posted their best weekly performance since early February, as rising exports boosted investor optimism. Malaysian palm oil exports for the Aug. 1-15 period rose 17.7 per cent from the same period a month ago to 644,589 tonnes, cargo surveyor Intertek Testing Services said on Thursday.

Another surveyor, Societe Generale de Surveillance, reported an increase of 18.7 per cent for the same period. The latest end-stocks report by industry regulator Malaysian Palm Oil Board which indicated July levels were only 1 per cent higher than the previous month's despite strong production also supported views for a robust demand. Malaysia, the world's No.2 palm oil producer has set its crude palm oil export tax for September at 4.5 per cent, unchanged since March and this could favour exports from Malaysia further compared to Indonesia.

CPO active month futures moved perfectly in line with our expectations. As mentioned in the previous update, while the supports hold in the 2,190-95 zone there is a good possibility of prices attempting to crossover the recent highs at MYR 2,300/tonne. We saw prices testing MYR 2,335 and the declining .

As we have maintained, though the possibility of a retracement exists in the coming sessions, the underlying trend still remains weak and we see such a pullback as a corrective one within a downtrend. This rally could fizzle out soon and start testing supports near MYR 2,270-75 levels where some minor support can be seen. Decline below MYR 2,245 could once again revive bearish hopes for MYR 2,095 or even lower. Unexpected rise above MYR 2,361 could hint at a rise towards MYR 2,420 levels now.

The wave counts still remains mixed and prefer for the time being to go with possibility of an end of wave “C” at MYR 2,220now. A decline below MYR 2,350 has dashed our bullish hopes. Ideally, prices could come down towards MYR 2,095 or even lower in the bigger picture. With the way prices have been behaving, the preferred wave counts now could be an extended wave “A-B-C-D-E” and eventually a break below MYR 2,200 opening the way for lower levels. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting at bearishness to be intact. Only a crossover above the zero line again could hint at a bullish reversal now.

Therefore, look for palm oil futures to test the resistances and decline .

Supports are at MYR 2,275, 2,245, 2,160. Resistances are at MYR 2,325, 2,355 and 2,400.

(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 >gnanasekar.t@gmail.com. )

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