Malaysian palm oil futures, ended up for a third straight session on Monday, touching a one-week high on support from US soyoil although a mildly stronger ringgit weighed on the market.

The benchmark third month November contract inched up higher against our expectations, but it needs to be seen if it can sustain and push higher above important resistance levels.

The first one is at 2,265 MYR/tonne followed by 2,340-50, being a very strong confluence of resistance levels. It is too early to change the medium- to long-term view to bullish again, but a possible double bottom formation and other statistical indications point to a possible intermediate bottom that has been made at 2,140.

Prices could find support again in the 2,175-2,200 region and then try to inch up gradually again. The bigger picture price structure does not yet confirm a bottom in place. But, a close above 2,300 could reinforce bullish expectations.

The favoured view

In the bigger picture the favoured view expects that while downticks to 2,210-20 or even lower to 2,175-80 hold, we can expect an upside in the coming sessions.

As we have been maintaining, we are still of the view that the underlying bigger trend continuing to be bearish, any upticks or unexpected rallies higher could be short-lived and prices could decline subsequently.

We need to see clear evidence of a bullish reversal accompanied by volumes. Apparently, volumes have been encouraging, but are still nowhere near the August 2015 bottom of 1,865.

For now we favour supports around the 2,225 range followed by 2,175-80 in the coming sessions. In the big picture we see more of an upside, as the chart picture is turning friendly in the near term.

We will now reassess the wave counts, as prices have risen above 2,370-2,400. A possible new impulse looks to have started again. One of our targets at 1,850 MYR/ton was met. The rally from there looks very impressive. As mentioned earlier, we expect prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,425 or even lower to 2,225, and then subsequently rise towards a medium to long-term target at 3,600, which could bring this current impulse to an end.

The medium to long-term bullish expectations have been dented on a fall below 2,655. This makes us believe that the high at 3,105 was an end off an impulse and the targets are near 2,200 or even lower where the equality target is expected to be tested.

Only a close above 2,640 could alter the wave counts again, which is not our favoured scenario now. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in the MACD are still below the zero line of the indicator, hinting at bearishness being intact. Only a crossover again above the zero line could hint at a bullish reversal.

Therefore, look for palm oil futures to consolidate and test resistance levels.

Supports are at MYR, 2,225, 2,175 and 2,145. Resistances are at MYR 2,265, 2,300 & 2,345.

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

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