Malaysian palm oil futures on BMD ended higher Friday, with the ringgit's weakness against the dollar and likely lower output providing support, while export data signaled a minor recovery in demand. Monsoon floods in several palm-growing parts of Malaysia also fanned worries that output in Malaysia would fall steeply in December. Cargo surveyor data Intertek Testing Services reported that Malaysian palm oil shipments in Dec. 1-20 dropped 12 percent to 883,575 tonnes from a month ago, slightly improving from the steeper declines recorded in early December. Another cargo surveyor Societe Generale de Surveillance showed that exports fell 9.8 percent for the same period.

CPO active month futures moved lower breaking key supports. As cautioned in the previous update, direct fall below 2600 MYR/ton could hint a failure to rally higher and a stronger corrective decline can be seen towards 2525-30 MYR/ton range being a fibonnaci retracement point. Resistances ara now at 2610-20 MYR/ton levels. Stronger support is seen at 2495-2500 MYR/ton levels being a strong confluence support point. We believe this level could hold any attempts to dip further and the upward move to resume from there again. Only a direct rise above 2658 MYR/ton could hint that the corrective decline has ended prematurely and further upside to 2800-25 MYR/ton levels can be seen subsequently. Favoured view expects a decline to 2525-30 MYR/ton levels while resistances cap.

As mentioned earlier prices met an intermediate wave target at 2135 MYR/ton and corrective decline to 2345-50 MYR/ton levels, followed by a sharp third wave move to 2575-2600 MYR/ton materialised. The potential third wave targets are near 2750-2800 MYR/ton levels now. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The negative divergence identified earlier has worked and strong corrective fall was seen. The averages in MACD are still above the zero line of the indicator hinting at bullishness to be intact. Only a crossover below the zero line again could again hint at weakness again.

Therefore, look for palm oil futures to test the resistances and then decline lower.

Supports are at MYR, 2545, 2520, 2485 Resistances are at MYR 2595, 2620 & 2655.

(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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