TECHNICAL ANALYSIS. Palm oil futures rise, test support levels

Malaysian palm oil futures ended lower on Monday marking the third straight session of losses, tracking weakness in related edible oils and as a stronger ringgit weighed on the market.

CPO active month December futures are moving on expected lines.

As we have been maintaining, it looks like the short- to medium-term has turned bearish, with the bigger picture still favouring bullishness ahead.

The big picture still indicates neutral to bullish tendencies and a chance of a strong revival in bullish trend.

One of our targets was almost met at 2,905 MYR/tonne levels, a crucial fibonacci retracement level. We still expect prices to edge higher towards 2,905 or even higher, with chances of further extending to 3,045/50.

But immediately prices are inclined to test supports at around 2,770 followed by 2,740 , a critical support, which might hold attempts to decline.

The bigger picture continues to display bullish tendencies and we still expect prices to eventually rise higher towards resistances mentioned above.

Only a direct fall below 2,695 could dent our bullish expectations and temporarily delay the upside expectations. Such a fall could once again see strong supports emerge in the 2,595-2,600.

Favoured view still expects, while prices hold above 2,725 that it could eventually inch higher towards targets mentioned above in the coming sessions. We 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.

As mentioned earlier, we expected prices to push higher towards 2,645initially 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 MYR/ton, which could bring this current impulse to an end.

The medium- to long-term expectation that we have been having 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 up 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.

The averages in MACD are above the zero line of the indicator hinting at a bullishness to be intact. Only a crossover again below the zero line could hint at bearishness again.

Therefore, look for palm oil futures to test the support levels and rise higher again in the coming sessions.

Supports are at MYR, 2,770, 2,740 & 2,700. Resistances are at MYR 2,845, 2,895 & 3,005.

The writer is the Director of Commtrendz Research. There is risk of loss in trading.