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Malaysian palm oil futures ended higher on Monday tracking an uptrend in crude oil prices and supported by soya oil on the US Chicago Board of Trade.
CPO active month July contract pulled back with the underlying trend remaining broadly weaker. As mentioned earlier, once below MYR 2,350/tonne, the decline could accelerate towards 2,310-15 being the next support. We saw a pull-back from 2,324 so far, but it has not been accompanied by healthy volumes. Therefore, that makes the pullback from lower levels suspicious. Only a decisive fall again below $2,310 could see further declines to 2,185-2,255 zone too, from where a strong rebound or a possible bottom is likely subsequently. Prices are expected to test 2,420-30 , where it could be met with strong resistance. With the trend still bearish, we can expect prices to break lower after the consolidation ends.
The favoured view expects that while upticks to 2,450 or even higher to 2,480 caps, we can expect more downside towards 2,310 or even lower to 2,275 . However, only a close above 2,480 could revive bullish hopes, which is not our favoured view now.
Wave counts: 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. We expected prices to push higher towards 2,645 initially and then correct lower 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 . 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 still below the zero line of the indicator hinting at bearishness to be intact. Only a crossover again above the zero line could hint at a bullish reversal again.
Therefore, look for palm oil futures to test the resistance levels and then decline subsequently.
Supports are at MYR 2,352, 2,310 and 2,275. Resistances are at MYR 2,395, 2,435 and 2,480.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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