Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday, hitting multi-month highs helped by weather concerns and a weakening ringgit.

Exports have been on the rise further underpinning sentiment. Exports of Malaysian palm oil products for September 1-25 rose 4.2 per cent to 1,339,354 tonnes from 1,285,247 tonnes shipped during August 1-25, cargo surveyor Societe Generale de Surveillance said.

CPO active month December futures shot higher in line with our expectations. As mentioned in the previous update, the technical picture is turning friendly now and a genuine reversal in trend could be underway.

As predicted earlier, potential exist for prices to further stretch towards MYR 2,335/tonne levels too, being an important medium-term resistance level. However, the strength of the uptrend has pushed prices as high as 2,408 levels so far. Immediate supports are at 2,325 followed by 2,250 levels and they are expected to hold supports in the coming sessions for a test of important near-term resistance at 2,430 followed by the psychological 2,500 .

Only a fall below 2,210 levels could postpone the bullishness. In the coming week, we expect prices to correct lower on the back of overbought conditions and subsequently consolidate with a bullish bias and inch higher towards stronger resistances towards 2,500-30 levels. A potential technical target is near 2,645 post the resistance at 2,500-30.

We will now reassess the wave counts, as prices have crossed over above MYR 2,370-2,400/tonne . 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 overbought zone now indicating a downside correction in the offing. As mentioned in the earlier update, the averages in MACD have gone above the zero line of the indicator hinting a bullish reversal. Only a crossover again below the zero line could hint at a resumption of the bearish trend.

Therefore, look for palm oil futures to test the resistance levels and then correct lower. Supports are at MYR 2,325, 2,248 and 2,210. Resistances are at MYR 2,430, 2,495 and 2,530.

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

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