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Crude palm oil futures on the Bursa Malaysia Derivatives Exchange ended higher on Friday on short-covering ahead of a long weekend, but weakness continues to be intact due to poor demand. Palm futures ended the week down 3.7 per cent from the previous week.
Exports of Malaysian palm oil products for January fell 14.6 per cent to 11,09,188 tonnes , cargo surveyor Societe Generale de Surveillance said on Monday.
The rout in the crude oil market could also hit appetite for palm in Indonesia and Malaysia, which have adopted ambitious biodiesel mandates to stoke domestic consumption of palm and bring down stocks.
CPO active month April futures are moving lower as expected.
As mentioned in the earlier update, a close below MYR 2,165/tonne could dash our bullish hopes and as such a fall below 2,160 could see prices once again slide to MYR 2,075-85/tonne levels or even lower. Strong resistance will be seen at 2180-85 levels followed by 2,215-20 levels. Stronger resistance is at MYR 2,250 levels now.
While supports are in the 2,120-25 levels hold, we can initially expect prices to edge higher towards 2,215 or even higher to 2,250 levels.
Subsequently, we expect the decline to continue towards MYR 2,100/tonne or even lower. Only a rise above MYR 2,285/tonne will revive bullish hopes again in the coming sessions.
We will have to once again review the wave counts, but will wait for a crossover above MYR 2,400/tonne to do that. Till then we will stick to our earlier assessment.
As mentioned earlier, a downtrend again could be confirmed on a close below 2,175 levels. This once again puts the spotlight on the MYR 1,700/tonne mark, which we anticipated earlier.
We are now tracking a final leg of an impulse in a declining trend with potential targets near 1,850 or even lower to 1,700 levels. Ideally, the next leg of a larger up move could potentially begin from this area.
RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have below the zero line of the indicator hinting at a bearish reversal again.
Only a crossover again above the zero line could hint at a resumption of the bullish trend.
Therefore, look for palm oil futures to test resistance levels and then decline again.
Supports are at MYR 2,125, 2,105 and 2,075. Resistances are at MYR 2,210, 2,250 and 2,287.
The writer is Director of Commtrendz Research. There is risk of loss in trading.
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