Malaysian palm oil futures on Bursa Malaysia Derivatives exchange eased lower on profit-taking. Debt concerns in Europe and slow demand growth could weigh on prices. However, improvement in export growth coupled with the onset of the festival season could underpin sentiment. Surveyor Intertek Agri Services put palm oil exports during July 1-15 at 7,52,047 tonnes, up 12 per cent from the previous month. Another surveyor, SGS (Malaysia) Bhd, pegged the figure at 7,31,842 tonnes, up 4.6 per cent on month. Malaysia's end-June palm oil stocks reached 2.05 million tonnes, an increase of 6.7 per cent from May, the government-backed Malaysian Palm Oil Board said earlier this week.

CPO futures are moving perfectly in line with our expectations. As mentioned in the previous update prices steadfastly bounced from 3,020-30 Malaysian ringgit (MYR) a tonne. We anticipated a reversal from the 3,000-3,025 MYR/tonne zone, which has the potential now to test 3,120 MYR/tonne in the near-term or even higher towards 3,185 MYR/tonne in the coming sessions. We saw prices moving towards 3,145 MYR/tonne as per expectations. Any declines to 3,105 MYR/tonne or even lower to 3,075 MYR/tonne could hold attempts to decline now. Subsequently, a move towards 3,185-3,200 MYR/tonne looks likely, also being a Fibonacci retracement zone as seen in the chart above. Unexpected fall below 3,055 MYR/tonne could dent our bullish expectations.

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 counted 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 even 2,600 MYR/tonne in the bigger picture. RSI is in neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator again indicating bearishness to be intact.

Therefore, look for palm oil futures to test the support levels and then bounce higher.

Supports are at MYR 3,105, 3,085 and 3,055. Resistances are at MYR 3,145, 3,185 and 3,200.

(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 .)

Related Topics
comment COMMENT NOW