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Malaysian palm oil futures ended sharply lower on Monday on fears of slowing demand and losses in other related oils. Demand growth slowed from a 25.6 per cent rise in exports from April 1-10. Exports of Malaysian palm oil products for April 1-15 rose 5.7 per cent to 638,293 tonnes over the same period last month. Adding to the negative sentiment, Malaysia, the world’s second largest palm producer and exporter, said it would resume export duties on crude palm oil.
CPO active month July contract declined after testing resistance levels, as per our expectations. As mentioned earlier, failure to hold support at MYR 2,440/tonne has the potential to drop to 2,395. The previous lows around 2,350 could offer minor support. Once below here, the decline could accelerate towards 2,310-15being the next support. Only a decisive fall again below $2,310 could see further declines to 2,185-2,255 too, from where a strong rebound or a possible bottom is likely.
The favoured view now expects that while upticks to 2,395-2,400 caps, we can expect more downside towards 2,310 or even lower to 2,275 .
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 to 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 of an impulse and the targets are near 2,200 or even lower. 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 support levels now. Supports are at MYR 2,350, 2,310 and 2,270. Resistances are at MYR 2,395, 2,430 and 2,475.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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