Malaysian palm oil futures on Bursa Malaysia Derivative exchange ended higher on Friday reaching to fresh six-week highs on the back of weather concerns. Crude palm oil contract gained for two consecutive days after export data issued by cargo surveyors reaffirmed a solid export rebound. Intertek Testing Services and Societe Generale de Surveillance reported exports of palm oil products for May 1-25 increased by 23.4 and 16.5 per cent respectively, compared with the same period last month. CPO futures moved as expected. As mentioned earlier the positive momentum suggests a move towards 3,445-50 Malaysian ringgit (MYR) a tonne and this could be a significant resistance to overcome.

Further resistance is at 3,510 MYR/tonne followed by 3,560 MYR/tonne. Near-term resistance is seen at 3,445-65 MYR/tonne levels now, which happens to be a Fibonacci retracement level. Ideally, prices could get capped in this zone for a decline back towards the 3,325-3,350 MYR/tonne zone levels initially. Good support will now be seen at 3,325-3,350 MYR/tonne. As mentioned earlier, a rise above 3,380 MYR/tonne negated our bearish view for 3,025 MYR/tonne. Only a direct fall below 3,250 MYR/tonne will revive bearish hopes for 3,025 MYR/tonne again.

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 with the possibility of stretching higher towards 3,510 MYR/tonne. A wave “C” kind of a decline looks after that. RSI is in the overbought zone now indicating that a downward correction is in the offing. The averages in MACD have gone above the zero line of the indicator indicating a bullish reversal. Therefore, look for palm oil futures to test the resistance levels initially and then correct lower.

Supports are at MYR 3,345, 3,310 and 3,274. Resistances are at MYR 3,465, 3,510 and 3,560.

(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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