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Malaysian palm oil futures on Bursa Malaysia Derivatives ended flat Monday as markets pondered over the recent fall that pushed prices to five-year lows on rising supplies and stocks.
Exports of Malaysian palm oil products during August 1-15 fell 15.9 per cent to 549,784 tonnes from 653,675 tonnes shipped during July 1-15, cargo surveyor Societe Generale de Surveillance said on Friday.
Soya markets are facing pressure over forecasts of a bountiful bean crop from the US.
That, in turn, is adding pressure on crude palm oil futures.
Energy prices have also been declining as markets have started ignoring the geo-political tensions since they have not had any significant supply disruptions so far.
Palm oil active month November futures are sharply lower with no meaningful retracements so far.
The extremity of the fall makes us believe that there is more to come.
The current levels near 2,075-2,095 Malaysian ringgit a tonne happen to be long-term supports and failure to hold here could have severe bearish implications.
Immediate support is at 2,025-30 levels followed by stronger support at 1,945 levels now. However, extremely oversold conditions warn us of possible retracement in the coming sessions.
Resistances will be seen at 2160-65 levels being a trend line resistance point and a stronger one will be at 2235-40 levels now. We expect the downtrend to continue lower after testing the above mentioned resistances.
As mentioned earlier a corrective A-B-C in progress with an equality target now stretching to 2135 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 1700 levels.
The current decline has targets near 1998-1957 levels from where a strong retracement could commence.
RSI is in the extremely oversold zone now indicating a possible upward correction in the offing.
The averages in MACD are still below the zero line of the indicator hinting at bearishness to be intact.
Only a crossover again above the zero line could hint at resumption in the bullish trend.
Therefore, look for palm oil futures to test supports and then rise again.
Supports are at ringgit 2045, 2028 and 1997. Resistances are at ringgit 2,165, 2,225 and 2,300.
The writer is the Director of Commtrendz Research. There is a risk of loss in trading
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