Malaysian palm oil futures fell more than 1 per cent on Monday as traders were expecting build up in stockpiles due to sluggish export demand.

CPO active month August contract continues to edge lower. After coming close to important resistance at 2,457 MYR/tonne , prices retraced quite sharply towards 2,407 . As mentioned earlier, prices could see a phase of consolidation and range bound moves before rising higher again. No change in view. Though the underlying long-term trend still remains bearish, the near-term picture has turned friendly. We can expect prices to retrace higher, but it is too early to change the medium to long term view to bullish again. But, fall below 2,390 could be the trigger for a decline. Only a break below 2,350 , could see prices accelerate towards 2,310-15 being the next support. And only a close below 2,310 could see further declines to 2,185-2255 too, from where a strong rebound or a possible bottom is likely subsequently. Favoured view in the bigger picture expects that while uptick to 2,510 or even higher to 2,565 caps, we can expect more downside towards 2,310 or even lower to 2,275 . Any uptick or unexpected rallies higher could be short-lived and prices could decline subsequently. However, a close above 2,510 could revive bullish hopes for the short-term or even higher, but subsequently we still favour a decline. For now we favour supports around 2,395-2,400 range to hold for a retest of highs around 2,510 or even higher in the coming sessions.

We will now reassess the wave counts, as prices have crossed over above 2,370-2,400 . A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive. As mentioned earlier, we expected 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 highs 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 MACD are have gone above the zero line of the indicator hinting at bullish reversal. Only a crossover again below the zero line could hint at a bearish reversal.

Therefore, look for palm oil futures to test the support levels and rise higher subsequently.

Supports are at MYR, 2,400, 2,375 and 2,350 Resistances are at MYR 2,457, 2,510 and 2,565.

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

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