Malaysian crude palm oil futures ended higher on fears of supply disruptions. Producing areas of Malaysia, mainly Johor which is one of the main producing centre, have been hit by heavy rains forcing people to flee their homes. Continued rains can further worsen the situation and send prices skyrocketing. Revival in CBOT soya oil futures also helped CPO futures this week. In the coming weeks, CPO futures are expected to remain underpinned by weather worries and its after effects on production.
CPO active March month contract bounced higher after finding support near the recent lows. As mentioned in the previous update, a consolidation between 1825 Malaysian ringgit (MYR) a tonne to 1935 MYR was expected. Resistance will be quite strong at 1930-35 MYR levels and a break above is expected to test the long-term rising trend line resistance at 2057-65 MYR levels. However, failure to cross 1930-35 MYR, will see another round of consolidation between 1830-1930 MYR levels, before it breaks higher. The move to 2003 MYR is the end of the fifth wave impulse and a move lower from there is a corrective A-B-C pattern in the making.
We are now in the powerful third wave impulse. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line in the indicator suggesting bullishness to be intact. Prices are below the short-term 8-day period EMA at 1878 MYR indicating short-term bearishness and the 34-day period EMA is at 1828 MYR. Therefore, look for palm oil futures to head higher and test the resistance levels.
Supports at 1877, 1854 and 1835 MYR. Resistances at 1935, 1976 and 2057 MYR.
(The author is the director of Commtrendz Research and 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 firstname.lastname@example.org.)