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Malaysian palm oil futures on the Bursa Malaysia Derivatives hit a one-month high on Monday lifted by a surge in exports for the first half of the month. However, rising production and stocks is still a big worry and continues to cap gains.
CPO active month November futures bounced back higher in line with our expectations.
As mentioned in the previous update, extremely oversold conditions warn us of possible retracement in the coming sessions.
As cautioned in the earlier update, prices structures warn us of getting bearish at present levels and any fall to MYR 1,975-85 a tonne could hold attempts to decline and subsequently test resistances mentioned above in the coming sessions.
The present rally coupled with rising volumes indicates further gains ahead for CPO futures. Only a fall below MYR 2,005 could cause doubts on our short-term bullish view and such a decline could take prices lower towards the recent low of 1,914 levels.
Favoured view expects prices to head towards important resistances near MYR 2,200, while MYR 2,000-05 holds.
As mentioned earlier, a corrective A-B-C in progress with an equality target now stretching to MYR 2,135 levels or even lower.
With the present structures, there is a good chance that we could be in a five wave impulse moving lower with equality targets near MYR 1,700 levels. The present decline has targets near MYR 1,845/tonne levels from where a strong retracement could commence.
Despite, a minor retracement, RSI is in the neutral zone now indicating that it is neither overbought nor oversold. 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 a resumption in the bullish trend.
Therefore, look for palm oil futures to test the support levels and then rise again.
Supports are at MYR 2,045, 2,005 and 1,975. Resistances are at MYR 2,150, 2,195 and 2,210.
The author is the Director of Commtrendz Research. There is risk of loss in trading.
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