Commodities

Crude Palm Oil: Nears a crucial support

Gurumurthy K BL Research Bureau | Updated on November 21, 2018 Published on November 20, 2018

Crude Palm Oil (CPO) prices have been on a free fall over the last few weeks. The CPO futures contract on the Bursa Malaysia Derivatives Exchange has declined below the psychological level of MYR 2,000 per tonne for the first time since 2015 in late October this year. The contract is currently trading at MYR1,800 per tonne.

Strong surge in inventory levels have dragged the price sharply lower. The sharp fall in the crude oil prices have also been weighing on CPO.

On the domestic front, the CPO futures contract on the Multi Commodity Exchange (MCX) has been on a strong downtrend since May this year. The contract hsa declined below the key support level of ₹580 last month and is currently trading at ₹500 per 10 kg.

Outlook

The downtrend is likely to remain intact in the short-term. However, a crucial long-term support is coming up which may have the potential to halt the current downtrend.

The Malaysian CPO (MYR 1,800 per tonne) contract has a near-term resistance at MYR 1,850. As long as it trades below it, a fall to MYR1,700 and MRY1,685 is possible in the short term. The level of MYR 1,685 is a strong long-term trend support. A strong bounce from this support may have the potential to reverse the current downtrend. A decisive upward reversal from MYR 1,685 can take the prices higher to MYR 2,000 levels.

On the domestic front, the MCX-CPO (₹500 per 10 kg) has an immediate support at ₹498. A bounce from there and a subsequent break above ₹520 can trigger a corrective rally towards ₹540 and ₹550. On the other hand, if the contract declines decisively below ₹498, it can fall to ₹480 and ₹470.

The region around ₹470 is a crucial long-term support for the MCX-CPO contract which may halt the current downtrend. A bounce from there can take the contract initially higher to ₹500. A further break above ₹500 will then target ₹550.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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Published on November 20, 2018
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