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Malaysian palm oil futures on BMD exchange rose to their highest level in three years in a holiday-shortened trade on Wednesday on the back of logistical problems in the key palm oil growing areas triggering supply worries. Palm oil extended gains after floods in major oil palm-growing regions damaged roads, disrupting transportation. Concerns about a slowdown in exports of soyabeans and soya products from Argentina amid an ongoing port strike continue to support palm oil prices. Energy prices have been volatile with escalating tensions in Egypt and West Asia underpinning pieces.
CPO futures are moving against our expectations. As expected, an unexpected rise above 3,835 Malaysian ringgit (MYR) a tonne has once again revived hopes for a retest of 3,900-10 MYR/tonne or even higher to 4,000 MYR/tonne. Immediate resistance is at 3,925 MYR/tonne. Supports will now be seen at 3,845 MYR/tonne followed by 3,820 MYR/tonne now. The negative patterns, which was observed in the previous update has been violated. When negative pattern get violated prices tend to rise quite sharply. However, the psychological 4,000 MYR/tonne seems elusive now. In the absence of any overbought conditions, we feel prices could gradually inch higher towards 4,075-85 MYR/tonne levels now.
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. We will review our wave counts now in line with the bullishness seen in the complex. 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. A minor A-B-C correction ended at 3,625 MYR/tonne and new impulse is in place indicating a possible fifth wave impulse to have begun. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator indicating the bullish trend to be intact. Only a cross-over below the zero line again could indicate bearishness again. Therefore, look for palm oil futures to test the resistance levels.
Supports are at MYR 3,845, 3765 and 3,625. Resistances are at MYR 3,925, 3,985 and 4,085.
(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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