Malaysian Palm oil future s technical analysis outlook for the week ended 270913

Malaysian palm oil futures on BMD ended higher Friday, lifted by overnight U.S. soyoil markets, but trade was muted as market participants waited for an update from the official MPOB on stocks, production and exports for Malaysia. Stocks at the end of August stood at 1.67 million tonnes, according to industry regulator, the Malaysian Palm Oil Board. Data for September's end-stocks, exports and output will be released on Oct. 10. Market participants and the industry expect Malaysia's palm production to rise sharply in September and October, as tropical oil palm trees enter a seasonal cycle that is favorable for the growth of fresh fruit. Energy prices have also declined sharply lower as it could shift some demand away from palm oil, which is used as a green alternative to produce biofuels.

CPO active month futures are moving as per expectations. Prices have been finding support at lower levels as expected. The 2275-80 MYR/ton range has been holding prices despite weakness in Soyoil. Also, volumes have been fairly good suggesting that prices could edge higher again. We can expect prices to test 2350 MYR/ton followed by 2385-95 MYR/ton in the coming sessions while 2270 MYR/ton holds. Unexpected fall below 2270 MYR/ton increases further the chances of a decline to recent lows at 2210 MYR/ton initially or even lower to 2150 MYR/ton levels. Only a push above 2415 MYR/ton could revive bullish hopes again for a move above 2500 MYR/ton. In the medium-term picture the broad consolidation in the 2175-2500 MYR/ton levels is still underway. Close below 2150 MYR/ton could turn the picture very weak targeting lows near 1850-1900 MYR/ton levels. However, there is hope for prices to find strong support near 2210 MYR/ton levels, and If it does, prices could gradually grind higher back to 2500 MYR/ton levels.

For the time being we will stick to the current wave counts. Only a close below 2270 MYR/ton could force to review the counts once again. The present decline has met an intermediate wave target at 2135 MYR/ton and the subsequent impulse characteristics of the present move makes us believe that it could exhaust near 2500 MYR/ton levels and then a subsequent decline to 2345-50 MYR/ton levels. It looks like the anticipated decline materialised. Further to this decline a sharp third wave move looks likely for 2575-2600 MYR/ton in the coming months. RSI is in the neutral zone 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 above the zero line again could again hint at possible bullishness again.

Therefore, look for palm oil futures to test the support levels.

Supports are at MYR, 2270, 2210, 2155 Resistances are at MYR 2345, 2385 & 2425.

(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.)

(This article was published on October 5, 2013)
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