Malaysian palm oil futures

Malaysian palm oil futures on BMD ended lower on profit-taking after five straight days of gains, although the downside was limited due to positive industry data released Thursday. Market movements in BMD may be slow Monday, as Tuesday is a public holiday in Malaysia and the Oct. 1-15 export data will be released Wednesday. Despite positive Oct. 1-10 export data, there is some caution in the market, as demand from India could nudge lower amid a record crop. Soyoil markets also decline sharply and the energy markets fell sharply lower after the International Energy Agency warned that the U.S. fiscal crisis could harm demand and said supplies are rising faster than previously thought.

CPO active month futures moved perfectly as per expectations. As mentioned in the previous update, we can expect prices to test 2350 MYR/ton followed by 2385-95 MYR/ton in the coming sessions while 2270 MYR/ton holds. Immediate supports are at 2335-45 MYR/ton followed by 230MYR/ton. Only a unexpected fall below 2270 MYR/ton increases further the chances of a decline to recent lows at 2210 MYR/ton initially or even lower to 2150 MYR/ton levels. Ideally, a push above 2415 MYR/ton could revive bullish hopes again for a move above 2500 MYR/ton or even higher. Though there are no concrete signs, technical picture is increasingly pointing towards a bullish market ahead contradicting prevailing fundamentals. An inverted head-and-shoulder pattern is in the making targeting highs at 2600-2700 MYR/ton levels. Break and close above 2495 MYR/ton could be the trigger for such a rise.

Fr the time being we will stick to the current wave counts. Only a close below 2270 MYR/ton could force to review the counts once again. The present decline has met an intermediate wave target at 2135 MYR/ton and the subsequent impulse characteristics of the present move makes us believe that it could exhaust near 2500 MYR/ton levels and then a subsequent decline to 2345-50 MYR/ton levels. It looks like the anticipated decline materialised. Further to this decline a sharp third wave move looks likely for 2575-2600 MYR/ton in the coming months. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have once again gone above the zero line of the indicator hinting at a bullish reversal now. Only a crossover below the zero line again could again hint at weakness.

Therefore, look for palm oil futures to test the support levels and then rise higher.

Supports are at MYR, 2335, 2300, 2270 Resistances are at MYR 2385, 2425 & 2485.

(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 >gnanasekar.t@gmail.com .)

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