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Malaysian palm oil futures on BMD are higher Monday, as markets expect dip in inventories below the 2 million tonnes mark at the end of February. This was despite poor export performance. CPO active month May futures moved perfectly in line with our expectations. As mentioned in the previous update, exhaustion signs seen in the chart could push prices initially lower towards 2,550-60 MYR/tonne or even lower to 2,515-20 levels and subsequent to the correction, we expected prices to start edging higher again. Resistances are seen around 2,595-2,610 levels now. Failure to follow-through higher put pressure on prices again. Such a move could see prices testing important trend line supports at 2,460-75 levels. Only an unexpected decline below 2,450 could hint at a stronger fall towards 2,405-10 levels. As the trend still remains strong both on the short-term and medium-term, we expect supports to hold again and edge higher again. Favoured view expects supports levels to hold and then prices to rise higher again towards our next technical objective near 2,690-2,700 levels in the coming weeks or even higher to a potential equality target at 2,800-15 in the coming months.
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. The current move could push higher towards 2,645 initially and then it could correct lower in a corrective pattern towards 2,310 or even lower to 2,250 , and then subsequently rise towards a medium to long-term target at 2,900 , which could bring this current impulse to an end. But, this is clearly a medium to long-term expectation and not to be mistaken for a short-term view. Any dips could prove to be opportunity to participate in the upcoming uptrend. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. As mentioned in the earlier update, the averages in MACD are above the zero line of the indicator hinting a bullish trend to be intact. Only a crossover again below the zero line could hint at a reversal in trend to bearish.
Therefore, look for palm oil futures to move higher again.
Supports are at MYR, 2,510, 2465 & 2,410 Resistances are at MYR 2,595, 2,625 & 2,695.
The writer is the Director of Commtrendz Research.There is risk of loss in trading.
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