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Malaysian palm oil futures on the Bursa Malaysia Derivatives were lower on Monday pressured by falling crude prices. This was despite a broadly weakening ringgit and modest gains in export figures for the first half of December. Expectations of lower output in December seem to be supporting prices at lower levels though. According to cargo surveyor SGS, exports of Malaysian palm oil products for December 1-15 rose 2.1 per cent to 618,314 tonnes from 605,624 tonnes last month. CPO active month March futures moved lower as expected. As mentioned in the previous update, though a smart pullback was seen from the lows of MYR 2,083/tonne levels, the bigger picture still looks weak and further downside pressure can be seen in the coming sessions. As expected, resistances near MYR 2,200-25 a tonne levels have been quite strong so far. Immediate support is at 2,120 levels and failure to hold support here could drag prices further towards recent lows or even lower to 2,075 being a trend line support point.
Favoured view expects prices to edge lower towards MYR 2,120/tonne levels initially followed by 2,075 levels, while resistances cap upside attempts. Only an unexpected move above MYR 2,225 could revive bullish hopes again. Such a move, though not favoured, could see a retest of MYR 2,300/tonne levels again. As mentioned earlier, a downtrend again could be confirmed on a close below 2,175 levels. This once again puts the spot light on the MYR 1,700 mark, which we anticipated earlier. We are now tracking a final leg of a impulse in a declining trend with potential targets near 1,850 or even lower to 1,700 levels. Ideally, the next leg of a larger up move could potentially begin from this area.
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 again could hint at resumption in the bullish trend.
Therefore, look for palm oil futures to test the supports levels. Supports are at MYR 2,125, 2,100 and 2,075. Resistances are at MYR 2,220, 2,245 and 2,275.
The author is the Director of Commtrendz Research and there is risk of loss in trading.
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