Malaysian palm oil futures on the Bursa Malaysia Derivatives Exchange ended higher on Monday on robust export numbers during May 1-10. This was despite an increase in stocks and output as reported by the official MPOB.

Exports of Malaysian palm oil products between May 1 and May 10 surged some 28 per cent to 391,856 tonnes compared with a month ago, cargo surveyor ITS reported.

CPO active month July futures fell lower as expected, but show some positive signs of a possible short-term pullback.

As mentioned in the previous update, a minor support is at MYR 2,545-50 area and prices have bounced from here. Resistances are now seen at MYR 2,625-35/tonne levels and a stronger one is at 2,685-90 levels.

While MYR 2,550-65 holds, we can expect a test of the above mentioned resistances.

Subsequently, we expect prices to continue the downtrend and go below MYR 2,500/tonne levels. However, a daily close above MYR 2,665 could turn the picture to neutral and see a retest of MYR 2,700-15/tonne levels.

As mentioned earlier, prices met an intermediate wave target at MYR 2,135 and corrective decline to MYR 2,345-50 levels, followed by a sharp third wave move to MYR 2,575-2,600 /tonne materialised.

Price structures suggest a possible third wave move ending at MYR 2,690 and a corrective, fourth wave with targets at MYR 2,450 or even lower. The fifth wave possibly ended at MYR 2,898 and a corrective A-B-C in progress with an equality target at MYR 2,454 levels now.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting at a bearish reversal.

Only a crossover again above the zero line could at resumption in the bullish trend.

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

Supports are at MYR 2,575, 2,545 and 2,505. Resistances are at MYR 2,625, 2,665 and 2,710.

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