Crude palm oil futures on Bursa Malaysia Derivatives were lower on Monday as falling soya futures weighed on sentiments. Prospects that farmers in the US mid-west would eventually speed up harvesting pushed prices lower. The recent rally in soya futures was due to delay in harvest. Weather could, however, offer some support going forward for CPO futures.

The monsoon season, which affects top oil palm producers Indonesia and Malaysia, is expected to begin in early or mid- November and stretch out into late-December. But palm prices could be under pressure if India, the world’s top edible oil consumer, raises import taxes on vegetable oils. There are talks of a possible raise in duties.

Export demand for Malaysian palm oil held steady, but was still down 11.2 per cent for October 1-25 period compared with a month ago, according to data from cargo surveyor Intertek Testing Services. Another cargo surveyor Societe Generale de Surveillance showed exports for the same period fell 11.7 per cent.

CPO active month January futures moved higher against our expectations. Overall, prices are moving in a broad range with a

mild bullish bias. We expect prices now to consolidate in the 2,120- 25 and 2,195-2200 MYR (Malaysian ringgit) a tonne range and then break out higher towards 2245-50 MYR. Price structures and indicators are hinting at any corrective dips to be supported at lower levels near 2,120-25 and then inch higher again. However, an unexpected fall below 2,095 could change the bullish picture to neutral.

Also, critical for the up move is how well soya oil futures hold above the crucial 31.50 cents level. Only a move below 31.50 cents could see CPO futures dive lower towards 2,000 MYRlevels or even lower. Strong resistance is seen at 2,185-95 levels now. We favour a gradual move higher in the coming sessions while supports hold.

As mentioned earlier a corrective A-B-C in progress with an equality target now stretching to 2,135 levels or even lower. With the current structures, there is a good chance that we could be in a five wave impulse moving lower with equality targets near 1,700 levels.This wave count will need to be reconsidered if prices cross 2,245 levels. We are now more inclined to an impulsive move towards 2295-2300 levels or even higher to 2,410. The trigger for such a move would be a close above 2,220 MYR/ tonne. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator hinting at a bullish reversal. Only a crossover again below the zero line could hint at a resumption of the bearish trend. Therefore, look for palm oil futures to test the support levels and rise again. Supports are at MYR 2,145, 2,105 and 2,000 Resistances are at MYR 2,195, 2,220 & 2265

(The author is the Director of Commtrendz Research and there is risk of loss in trading. He can be reached at gnanasekar.t@gmail.com. )

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