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Malaysian palm oil futures on Bursa Malaysia Derivatives ended lower on Monday weighed by weakness in the soya complex. Disappointing export demand, strong ringgit and rising stock piles have been weighing on the markets.
Malaysian prices recorded the biggest quarterly loss in the past few years. Cargo surveyor SGS reports a mere 4.6 per cent on-month increase in June export volumes despite Ramzan starting over the weekend.
Crude palm oil active month September futures are moving perfectly in line with our expectations.
As mentioned in the previous update, subsequent to the corrective up move to MYR (Malaysian ringgit) 2,485/tonne, prices are expected to move lower again. At present, supports are seen at 2,410-20/tonne levels and we expect prices to hold in the zone for a revival in the uptrend again.
A move below MYR 2,375 could hint at weakness again possibly targeting MYR 2,250 on the downside. However, our favoured view expects prices to find support above MYR 2,400 levels and then gradually break above key resistance at MYR 2,512, targeting MYR 2,700levels on the upside.
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 2,575-2600 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 now.
The fifth wave possibly ended at MYR 2,898 and a corrective A-B-C in progress with an equality target at MYR 2,350 levels now.
RSI is in the neutral zone now indicating that it is neither overbought nor oversold. It is also indicating a positive divergence, where prices are making lower lows not confirmed by lower lows in the indicator.
The averages in MACD are still 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 support levels and then rise again.
Supports are at MYR 2,410, 2,375 and 2,300 while resistances are at MYR 2,465, 2,515 and 2,550.
(The writer is the Director of Commtrendz Research and also in the advisory panel of Commodity exchanges and corporate houses. The views expressed in this column are personalhis own. This analysis is based on the historical price movements and there is risk of loss in trading.)
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