Malaysian palm oil futures on Bursa Malaysia Derivatives Exchange ended higher on Friday, spurred by bargain hunting after recent declines and short-covering ahead of the weekend. A weaker ringgit cushioned prices of the edible oil by making it cheaper for overseas buyers and refiners who are restocking ahead of the Muslim festival of Ramzan.
A drop in palm oil stocks in Malaysia, the world's No.2 producer of the edible oil, to their lowest in nearly a year, at 1.82 million tonnes by the end of May, also boosted the sentiment. The latest US Department of Agriculture report pegged its global soyabean stockpile estimate for the 2013-14 season at 265 million bushels, within market expectations.
Crude palm oil active month futures are moving perfectly in line with our expectations. As mentioned in the earlier update dips could now find support near 2,423-25 ringgit (MYR) a tonne followed by 2,395 MYR/t levels and while these supports hold attempts to dip we expect prices to eventually test 2,505 MYR/t or even higher to 2,555 MYR/t being an equality target. Prices are set to move higher and test above-mentioned levels in the coming week. Price structures are turning friendly once again and we expect further strength in CPO futures. Only a daily close below 2,355-60 MYR/t could turn the picture weak again which we do not favour presently. Initial support is at 2,425 MYR/t followed by 2,400-05 MYR/t.
The wave counts still remains mixed and prefer for the time being to go with possibility of an end of wave “C” at 2,220 MYR/t now. A decline below 2,300 MYR/t has dashed all bullish hopes. Ideally, prices could come down towards 2,000 MYR/t or even lower in the bigger picture as an extension of wave “C”. There is also a possibility that 2,220 MYR/ton has ended with an intermediate bottom. This means a new impulse could end somewhere near 2,500-2,555 MYR/t and the impulse could continue higher while 2,270 MYR/t remains undisturbed. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal. Only a crossover below the zero line again could indicate a bearish trend.
Therefore, look for palm oil futures to test the resistances levels.
Supports are at MYR 2425, 2395 and 2360. Resistances are at MYR 2475, 2505 and 2555.
(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at >gnanasekar.t@gmail.com .)