Malaysian palm oil futures on Bursa Malaysia Derivatives exchange ended lower on Friday, as a flurry of bearish data weighed on prices. Malaysia's May palm oil stocks were reported up 14.8 per cent to 1,918,023 tonnes from a revised 1,671,108 tonnes in April, industry regulator Malaysian Palm Oil Board said. The USDA report released overnight was less bullish for soyabeans and wheat than corn, as it suggested there were adequate supplies of both commodities. In other data, exports of Malaysian palm oil products for June 1-10 rose 22 per cent to 395,041 tonnes from 323,655 tonnes shipped during May 1-10, cargo surveyor ITS estimated.

CPO futures moved in line with our expectations. As mentioned in the previous update, fall below 3,405 Malaysian ringgit (MYR) a tonne could now result in a double top pattern with potential targets near 3,250 MYR/tonne. Fall below 3,250 MYR/tonne has revived bearish hopes once again for 3,025 MYR/tonne again. Resistances are at 3,325-3,350 MYR/tonne levels now. Favoured view now expects advances to be capped in the 3,285-3,325 MYR/tonne range for an initial fall towards 3,135-45 MYR/tonne levels. A mild bounce higher can be seen from there. Subsequently, it could attempt to test 3,025 MYR/tonne our favoured level which has been eluding us so far.

We believe the impulse that began from 1,427 MYR/tonne, which hit 4,486 MYR/tonne ended and a prolonged corrective move has possibly ended at 1,335 MYR/tonne. In the big picture, a new impulse began from 1,335 MYR/tonne and the third wave with a projected objective of 3,900 MYR/tonne has been met. Unlike in the previous update, we see the fall towards 3,133 MYR/tonne as an end of wave “A” now and not the wave “C” as anticipated earlier. A corrective wave “B” has met one potential target near 3,465 MYR/tonne. A wave “C” kind of a decline looks likely with potential to test 2,600 MYR/tonne. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator again indicating strong bearishness ahead.

Therefore, look for palm oil futures to head lower.

Supports are at MYR 3,205, 3,145 and 3025. Resistances are at MYR 3,285, 3,325 and 3,375.

(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_thiagarajan@yahoo.com. )

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