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Palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday on better-than-expected export estimates from cargo surveyors and weather issues further supporting prices. Markets are keeping an eye on the monsoon and flooding in parts of Malaysia, which may hurt December output. Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm products during December 1-20 rose 8.8 per cent to 911,595 tonnes compared with the same period a month ago. The increase in exports could help to reign in on the swelling inventories, which hit a high of 2.28 million tonnes in the last month.
CPO active month March futures are moving in a broad range with a mild bullish bias. Though prices have pulled back higher from recent lows, the bigger picture still looks weak and further downside pressure can be seen in the coming sessions. Immediate resistance is seen near MYR 2,185-90/tonne levels being a trend line resistance zone. Possibility of a further extension towards MYR 2,215-20 also looks likely. However, subsequently, the decline is expected to continue further. Fall below 2,105 again could drag prices further towards recent lows at 2,075 levels being a fairly strong support level in the short-term. Favoured view expects prices to edge lower towards MYR 2,120/tonne levels initially followed by 2,075 levels, while resistances cap upside attempts. Only an unexpected move above MYR 2,217/tonne levels could revive bullish hopes again. Such a move though not favoured could see a retest of MYR 2,300 levels again.
As mentioned earlier, a downtrend again could be confirmed on a close below MYR 2,175/tonne levels. This once again puts the spot light on the MYR 1,700 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 upmove 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 are below the zero line of the indicator hinting at a bearish reversal. Only a crossover again above the zero line again could hint at resumption in the bullish trend.
Therefore, look for palm oil futures to test the resistance levels and then decline.
Supports are at MYR 2,145, 2,105 and 2,075. Resistances are at MYR 2,185, 2,220 and 2,245.
The writer is the Director of Commtrendz Research and there is risk of loss in trading.
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