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Malaysian crude palm oil (CPO) futures on the Bursa Malaysia Derivatives ended higher on Monday due to weather concerns and nervousness ahead of the Malaysia Palm Oil Board data to be released later this week. Forecasts for unfavourable weather in parts of key corn and soya-growing regions resulted in short-covering.
CPO active month November futures bounced back higher in line with our expectations.
As mentioned in the previous update, extremely oversold conditions warn us of possible retracement in the coming sessions. Immediate resistance will be at MYR 2,095/2,100 a tonne followed by a stronger one at 2,151 levels.
The prices structures warn us of getting bearish at present levels and any fall to MYR 1,975/85 could hold attempts to decline and subsequently test resistances mentioned above in the coming sessions.
Only a fall below MYR 1,945/tonne could cause doubts on our short-term bullish view and such a decline could take prices lower towards 1,835-45/tonne levels, which we do not favour presently.
Due to the positive divergences seen in indicators, we believe the downside from current levels to be limited and more chances exist for a push towards MYR 2,200/tonne levels in the coming weeks.
As mentioned earlier, a corrective A-B-C in progress with an equality target now stretching to MYR 2,135/tonne levels or even lower.
With the present structures, there is a good chance that we could be in a five wave impulse moving lower with equality targets near 1,700/tonne levels. The present decline has targets near 1,845 levels from where a strong retracement could commence.
Despite, a minor retracement, RSI is still in the extremely oversold zone now indicating a possible upward correction in the offing.
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 resumption in the bullish trend.
Therefore, look for palm oil futures to test the support levels and then rebound.
Supports are at MYR 2,005, 1,975 and 1,900 while resistances are at MYR 2,075, 2,100 and 2,200.
The author is the Director of Commtrendz Research. There is risk of loss in trading.
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