Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday, after it rose higher in the morning session due to a weakening ringgit and a recovering soya complex. CPO active month September futures moved in line with our expectations.

As mentioned earlier, failure to hold support around MYR 2,550/tonne levels, has changed the near-term picture to bearish and below 2,420 has caused doubts to our long-term bullish view. Such a fall could test the next crucial support around 2,330-35 levels in the short-term, where it is expected to find a possible near-term bottom. A possible head-and-shoulder pattern has been confirmed on a break below 2,475 , which is quite a bearish sign.

Pullbacks have been shallow and have not shown any signs of reversal yet. Resistances are at 2,475 followed by 2,550 levels now. Since the momentum favours further declines, our favoured view expects prices to edge lower towards 2,325-30 levels and then possibly find a near-term bottom and edge higher from there.

This is our favoured expectation. Only an unexpected rise above 2,595 on a closing basis could hint at resumption of the uptrend, which could potentially stretch to test 2,790-2,800 levels, or even higher.

Wave counts: A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive. As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,460 or even lower to 2,225 , and then subsequently rise towards a medium to long-term target at 2,900 , which could bring this current impulse to an end.

The medium- to long-term expectation that we have been having is slowly materializing and we will watch for any signs of a possible impulse wave in the making.

Any dips could prove to be opportunity to participate in the upcoming uptrend. However, the picture could turn weak below 2,200 levels. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. As mentioned in the earlier update, the averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal in trend. But, the crossover tends to happen in a correction and again a bullish crossover can materialize again.

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

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

Supports are at MYR 2,330, 2,285 and 2,220. Resistances are at MYR 2,475, 2,550 and 2,600.

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

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