Malaysian palm oil futures on BMD exchange ended higher on bargain hunting rebounding from its lowest level in three months. Oilseeds, wheat and cotton have slumped this week on speculation that the unrest in Libya and West Asia may continue, reducing demand for commodities. Palm has slumped 5.5 per cent this week. Malaysia's palm oil exports declined 8.2 per cent in the first 25 days of February to 9,73,441 tonnes from a month ago, independent market surveyor Intertek said on Friday. Energy prices crossed the crucial $100/barrel mark during the day, which prompted Saudi Arabia, one of the largest producers to hike output which cooled the market subsequently. However, the edible oil complex could get a lot of support from high energy prices going forward.

CPO futures fell sharply lower in line with our expectations. As expected failure to hold support at 3,625 Malaysian ringgit (MYR) a tonne, dragged prices lower. As mentioned in the previous update, CPO futures were bracing itself for a decline to 3,550 MYR/tonne or even lower to 3,375-3,400 MYR/tonne levels also being a Fibonacci retracement point. Ideally, the market looks like it has completed a temporary corrective sequence and now a move to 3,585 MYR/tonne or even higher to 3,625 MYR/tonne could be underway. Strong resistance could now be seen in the 3,625-3,700 MYR/tonne range. Subsequently, a decline towards 3,200 MYR/tonne or even lower can be seen. We believe the impulse that began from 1,427 MYR/tonne, which hit 4,486 MYR/tonne ended and a prolonged corrective move has possibly ended at 1,335 MYR/tonne. In the big picture, a new impulse began from 1,335 MYR/tonne and the third wave with a projected objective of 3,900 MYR/tonne has been met. Most probably a wave “A” target has been met. A corrective wave “B” targeting 3,625-3,700 MYR/tonne can be seen now. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator indicating a bearish reversal. Only a cross-over above the zero line again could indicate a reversal in trend. Therefore, look for palm oil futures to test the resistance levels initially and then fall lower again.

Supports are at MYR 3,465, 3355 and 3,295. Resistances are at MYR 3,550, 3,625 and 3,700.

(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_thiagarajan@yahoo.com.)

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