Malaysian palm oil futures on Bursa Malaysia Derivatives Exchange ended higher on Thursday, in shortened trading as investors kept away ahead of a long weekend.

Short-covering and position squaring ahead of the Lunar New year weekend drove prices higher. Malaysia’s January palm oil exports fell 11 per cent, Intertek estimated.

Prices have been on a decline unable to sustain at higher levels as the pressure on stocks mount due to poor offtake.

CPO active month futures have been volatile of late. As mentioned in the previous update, the favoured view expected supports to hold on the downside and prices to revisit and cross MYR 2,600/tonne levels as long as the downside at MYR 2,445 remains undisturbed. In the short-term, we believe prices could now be finding supports in the MYR 2,530-25being a rising trendline support point.

Failure to find support here could bring the MYR 2,470-75 levels back in focus. This level happens to be the critical support zone where an earlier inverted head-and-shoulder pattern break out took place.

Favoured view expects supports to hold and prices to revisit and cross MYR 2,600/tonne levels while it stays above MYR 2,445 in the bigger picture. Such a move could see prices testing MYR 2,645 being an important resistance point.

Prices met an intermediate wave target at MYR 2,135 and corrective decline to MYR 2,345-50levels, followed by a sharp third wave move to MYR 2,575-2,600 materialised. Price structures suggest a possible third wave move ending at MYR 2,690 and a corrective, fourth wave with targets at MYR 2,450 or even lower.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal.

Only a crossover above the zero line again could again hint at bullishness. Therefore, look for palm oil futures to test the supports and move higher again.

Supports are at MYR 2,535, 2,475 and 2,445. Resistances are at MYR 2,575, 2,595 and 2,625.

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