Crude palm oil futures on the Bursa Malaysia Derivatives ended marginally higher on Monday defying a strong ringgit, which normally caps demand. CPO futures were supported by a pick-up in exports. Exports of Malaysian palm products during April 1-20 rose 9.6 per cent from a month earlier, cargo surveyor Intertek Testing Services reported. Another cargo surveyor Societe Generale de Surveillance showed exports for the same period rose 8.3 per cent. Malaysia will further offer duty-free exports of crude palm oil in May.

CPO active month July futures are seesawing in the broad range. As mentioned in the previous update, while MYR 2,085/tonne holds, there is a chance for price to move higher and test resistances at 2,175-2,200 range. Mild bullishness is seen in the short-term. However, failure to follow-through higher above MYR 2,175-80 could pressure prices lower again. Prices are now expected to move above 2,180 targeting close to 2,220-25 levels.

However, it is unlikely that a sustained upward rally could materialise subsequently. The bigger picture has turned decisively weak now. Any upticks should find resistance near MYR 2,180-85/tonne levels, followed by 2,220-30 levels. Only a decline below MYR 2,120/tonne, could hint at weakness again and such a move could revive bearish expectations again and revive hopes of a test of medium-term targets at 1,900levels. The MYR 2,085/tonne range has been holding for the fourth time in the past six months and is a critical level to watch out for. A close below this level with good volumes will hint at the beginning of strong downtrend towards 1,900 levels or even lower.

We will have to once again review the wave counts, but will wait for a crossover above 2,400 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 spot light 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 gone below the zero line of the indicator hinting at a bearish reversal again. Only 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 2,145, 2,120 and 2,085. Resistances are at MYR 2,185, 2,225 and 2,250.

The writer is the Director of Commtrendz Research. There is risk of loss in trading.

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