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Malaysian palm oil futures on Monday ended lower on expectations of rising production. CPO active month October futures moved against our expectations. An unexpected fall below 2,585 MYR/tonne could dent our bullish expectations.
Very strong support kicks in around 2,545-50 now. It looks like the short- to medium-term has turned bearish, but the bigger picture still favours bullishness ahead.
The big picture still indicates neutral tendencies and a chance of a revival in bullishness from critical support points. We saw prices testing 2,673 and then declining from there. Certain important short-term supports have also been broken, making the charts wobbly in the ear-term.
Only a direct fall below 2,505 could dent our bullish expectations and change the trend to bearish once again. Such a fall could open the way for a sharper fall subsequently. The favoured view still expects prices to find support and inch higher again in the coming sessions.
Wave countsWe will now reassess the wave counts, as prices have crossed over above 2,370-2,400. A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive.
We expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,425 or even lower to 2,225, and then subsequently rise towards a medium- to long-term target at 3,600, which could bring this current impulse to an end.
Our medium to long-term expectation is slowly materialising and the impulse wave is underway. But a short-term fall below 2,800 now has caused doubts on our overall bullish expectations.
The present upward move from 2,425 looks impulsive, with potential targets around 2,795-2,800 while 2,585 holds. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold.
Positive divergences in indicators hint at a bullish reversal ahead. The averages in MACD have gone above the zero line of the indicator, hinting at a bullish reversal. Only a cross-over below the zero line could hint at bearishness again.
Therefore, look for palm oil futures to test support levels and rise higher again.
Supports are at MYR 2,545, 2,510 and 2,430. Resistances are at 2,610, 2,645 and 2,725.
The writer author is the Director of Commtrendz Research. and There is risk of loss in trading
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