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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday on hopes of demand rising ahead of the festival season. The share of imports to overall edible oil consumption is likely to hit 65.3 per cent, against 61.2 per cent in the previous year, data compiled by the US Department of Agriculture showed.
CPO active month July futures are moving in expected lines. As mentioned earlier, prices could bottom out near MYR 2,565/tonne levels, from where a possible intermediate bottom can be seen. However, it could consolidate in the MYR 2,595-2,650 range. A decisive break above MYR 2,672 could hint at strength again which could potentially push prices higher towards MYR 2,730-35 levels being a strong resistance level in the coming sessions. Supports are seen at MYR 2,620 levels followed by MYR 2,595. Favoured view: Expect prices to edge higher either after testing the above mentioned supports or directly moving above MYR 2,660/tonne levels. Only a direct fall below 2,573 could dash our bullish hopes further dragging prices towards MYR 2,400 levels, which we do not favour.
As mentioned earlier, prices met an intermediate wave target at MYR 2,135 and corrective decline to MYR 2,345-50/tonne levels, followed by a sharp third wave move to MYR 2,575-2,600 materialised. Price structures suggest a possible third wave move ending at MYR 2,690 and a corrective, fourth wave with targets at MYR 2,450/tonne or even lower. The fifth wave possibly ended at MYR 2,898 and a corrective A-B-C in progress with an equality target at MYR 2,615-20 levels and an extension even to MYR 2,545-50. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting at a bearish reversal. Only a crossover again above the zero line could at resumption in the bullish trend.
Therefore, look for palm oil futures to test the support levels and climb again in the coming sessions. Supports are at MYR 2,620, 2,595 and 2,575. Resistances are at MYR 2,665, 2,705 and 2,735.
The author is the Director of Commtrendz Research. There is risk of loss in trading.
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