Malaysian crude palm oil (CPO) futures on Bursa Malaysia Derivatives exchange ended lower on Friday on worries over slower overseas demand after top producer Indonesia revised its export tax structure that could make shipments cheaper. The changes, which take effect from October 1, could make shipments cheaper than those from the world's No.2 producer, weighing on Malaysian palm oil futures. Soya futures rallied higher overnight as private forecasts estimated yields to be three per cent below the earlier USDA forecast. Energy futures also rallied higher after the Federal Reserve Chairman, Mr Ben S. Bernanke, said growth will resume and the central bank had tools to stimulate the economy.
CPO futures are moving perfectly in line with our expectations. As mentioned in the previous update, a decline back towards 2,900 Malaysian ringgit (MYR) a tonne or even lower can be seen after this up move towards 3,085 MYR/tonne. Near-term support is at 2,945 MYR/tonne followed by 2,920 MYR/tonne. Unexpected close above 3,045 MYR/tonne on the November futures could postpone the bearishness. Such a rise could aim for 3,095-3,100 MYR/tonne. The picture could also turn decisively bullish aiming for 3,150 MYR/tonne levels or even higher. Failure to cross 3,045 MYR/tonne on the other hand could prolong the bearishness taking prices lower below 2,900 MYR/tonne.
We believe the impulse that began from 1,427 MYR/tonne, which hit 4,486 MYR/tonne ended and a prolonged corrective move has possibly ended at 1,335 MYR/tonne. In the big picture, a new impulse began from 1,335 MYR/tonne and the third wave with a projected objective of 3,900 MYR/tonne has been met. Unlike in the previous update, we counted the fall towards 3,133 MYR/tonne as an end of wave “A” now and not the wave “C” as anticipated earlier. A corrective wave “B” has met one potential target near 3,465 MYR/tonne. A wave “C” kind of a decline looks likely with potential to test even 2,600 MYR/tonne in the bigger picture. RSI is in neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator again indicating bearishness to be intact.
Therefore, look for palm oil futures to test the resistance levels.
Supports are at MYR 2,960, 2,921 and 2,875. Resistances are at MYR 3,015, 3,045 and 3,105.
(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at firstname.lastname@example.org.)