Malaysian palm oil futures on Bursa Malaysia Derivatives (BMD) exchange rose higher on Friday boosted by strength in the vegetable oils complex. Weather concerns about all three primary US commodity crops, corn, wheat and soyabeans drove prices higher throughout the week. Palm oil has lost about 20 per cent so far this year due in part to high stocks, and persistent concerns about commodities demand due to uncertainties over economic growth. Demand concerns once again resurfaced, as exports of Malaysian palm oil products for August fell 0.5 per cent to 16,20,408 tonnes, cargo surveyor SGS said late on Monday. Energy prices fell on Friday as US jobs growth stalled reviving concerns of weaker demand to weigh on prices.
CPO futures are moving perfectly in line with our expectations. As mentioned in the previous update, unexpected close above 3,045 Malaysian ringgit (MYR) a tonne on the November futures could postpone the bearishness and such a rise could aim for 3,095-3,100 MYR/tonne levels. The picture could also turn decisively bullish aiming for 3,150 MYR/tonne levels or even higher. Supports are seen at 3,020 MYR/tonne followed by 2,975 MYR/tonne now. Ideally, we foresee a short-term rise towards above mentioned levels or even higher as long as supports at 2,970 MYR/tonne holds.
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 supports initially and then rise higher subsequently.
Supports are at MYR 3,025, 2,975 and 2,920, Resistances are at MYR 3,075, 3,100 and 3,150.
(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.)