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Malaysian palm oil futures on Bursa Malaysia Derivatives Exchange ended higher on Friday, after export data signalled improving demand while a possible shortage of coconut oil supply from the Philippines further aided the bullish sentiment. Palm oil prices posted a weekly gain of 3.6 per cent, fuelled by fears that super typhoon Haiyan had caused severe damage to coconut crops in the Philippines, disrupting coconut oil supply from the world's biggest exporter. Exports of Malaysian palm oil products dropped 4.6 per cent in the first half of November, cargo surveyor Intertek Testing Services said, a slight improvement from shipments in the November 1-10 period which fell by a steep 13 per cent. Exports are expected to improve as China is expected to increase purchases to replenish its stocks before their Lunar New Year festival in January.
Crude palm oil active month futures are moving in line with our expectations. As mentioned in the previous update, any dips to 2,485-2,500 Malaysian ringgit a tonne (MYR/t) range is expected to hold well now. The current up move could extend higher to 2,685-2,700 MYR/t levels, and then a bigger corrective decline could begin from there. However, potential targets for this move are near 2,750-2,810 MYR/t range in the coming months, where several long-term resistances are bunched up. Immediately supports at 2,560-70 MYR/t levels. A close below 2,550 MYR/t could hint at failure to capitalise on the current bullish momentum, which could bring the crucial 2,475-85 MYR/t support back. Failure to hold support here at 2,475-85 MYR/t could further take it to 2,400 MYR/t levels. However, a direct rise and close above 2,635 MYR/t could see prices testing 2,685 MYR/t or even higher. Favoured view expects prices to hold near 2,665-75 MYR/t and then rise higher towards 2,700 MYR/t levels.
As mentioned earlier prices met an intermediate wave target at 2,135 MYR/t and corrective decline to 2,345-50 MYR/t levels, followed by a sharp third wave move to 2,575-2,600 MYR/t materialised. The potential third wave targets are near 2,750-2,800 MYR/t levels now. RSI is in the neutral zone now 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 supports and rise higher subsequently
Supports are at MYR, 2565, 2510 and 2475 Resistances are at MYR 2635, 2685 and 2710.
(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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