The uptrend in Crude Palm Oil (CPO) prices that has been in place since last August, seems to be losing momentum. The CPO futures contract on the Multi Commodity Exchange (MCX) made a high of ₹673 per 10 kg on May 22, and has come off from there.

The CPO contract has slumped over 6 per cent and is currently trading at ₹632 per 10 kg.

Outlook

The downward reversal in the CPO prices over the last one month signals that this could be a beginning of a corrective fall of the overall uptrend that has been in place since August 2017. Key short-term supports are at ₹633 — the 21-week moving average and at ₹626.

If the contract manages to sustain ₹626 and reverses higher in the coming days, the downside pressure will ease.

A bounce-back to ₹660 or ₹670 is possible. In that case, a range-bound move between ₹625 and ₹670 can be seen for some time. A breakout on either side of ₹625 or ₹670 will then decide the next trend.

On the other hand, if the MCX-CPO contract breaks below ₹626 decisively in the coming days, the downside pressure will increase.

Such a break will then increase the likelihood of the contract extending its current fall to ₹600 or ₹590 in the coming days.

A series of key supports are poised in the band between ₹600 and ₹590. A further fall below ₹590 looks less probable at the moment.

A strong upward reversal from the ₹600-₹590 region is positive for CPO from a long-term perspective.

Such a reversal will have the potential to take the MCX-CPO contract higher to ₹670 and ₹680 levels over the long term.

But if the contract breaks below ₹590 decisively, a fall to ₹550 cannot be ruled out.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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