Crude palm oil (CPO) futures on the Bursa Malaysia Derivatives ruled lower on Monday as falling energy prices and soya futures weighed on the sentiment.

The soya complex fell on Monday on prospects that farmers in the US Midwest would speed up harvesting. The recent rally in soya futures was due to delay in harvesting. They were further pressured after private forecasts estimated US 2015 soyabean plantings to hit a record 88.5 million acres. The pace of exports continued to be sluggish for CPO. Exports of Malaysian palm oil products during October 1-20 fell 11.4 per cent to 884,628 tonnes, cargo surveyor Societe Generale de Surveillance said on Monday.

Weaker exports in October could lead to higher stocks unless production also sags.

CPO active month January futures are moving in a broad range with a bearish bias. As mentioned in the previous update, our favoured view expected prices to see a consolidation in the MYR 2,135-45 and 2,195-2,200 a tonne range and then breakout higher towards 2,235. Though prices haven’t fallen below crucial support at MYR 2,100/tonne levels, price structures display weakening tendencies.

Such a decline could take prices lower towards next important support at MYR 2,055-65 levels again, which is a critical trend line support below which the trend could again turn bearish. We expect good support around these levels and currently, it looks unlikely for prices to break this support easily. However, if soya oil futures close below 31.50 cents, then CPO futures could dive in line with it towards 2,000 levels or even lower. Strong resistance is seen at 2,145-50 levels followed by MYR 2,165-75 a tonne levels now.

As mentioned earlier, a corrective A-B-C in progress with an equality target now stretching to 2,135 levels or even lower. With the present structures, there is a good chance that we could be in a five wave impulse moving lower with equality targets near 1,700 levels. The current decline has targets near 1,845 levels from where a strong retracement could commence. Despite, a minor retracement, RSI is in the neutral zone now indicating that it is neither overbought nor oversold.

The averages in MACD are above the zero line of the indicator hinting at a bullish reversal. Only a crossover again below the zero line could hint at resumption in the bearish trend.

Therefore, look for palm oil futures to head lower and test the support levels. Supports are at MYR 2,105, 2,065 and 2,000. Resistances are at MYR 2,165, 2,210 and 2,245.

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

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