Malaysian palm oil futures ended sharply higher on Monday, and climbed towards multi-month highs, on expectations of solid demand ahead of Ramadan festivities and further buoyed by firmer overnight soyoil.

CPO active month July futures are moving on expected lines. As mentioned before, ideally, prices are expected to hit MYR 2,450-60 /tonne and bounce higher, which happens to be a long-term rising trend line support level.

Once it finds an intermediate bottom in the above mentioned range, prices could pull back towards resistance at 2,630 followed by 2,725, again. Prices have moved perfectly in line with our earlier view so far. Strong resistance will be noted around 2,720-2,740, a fibonacci retracement level.

It would appear difficult to cross this zone in the near-term; expect some corrective decline from there. Any dips to 2,630-40 followed by 2,595 are expected to hold attempts to decline.

As illustrated in earlier updates, though, it looks like the short to medium-term has turned bearish, the bigger picture still favours bullishness ahead. The big picture still indicates neutral tendencies and a chance of a revival in bullishness from critical support points.

The current pullback seems to suggest that it could push higher again, ideally towards 2,745-50.

An unexpected fall and close below 2,510 could force us to abandon our bullish view. Such a decline could expose the downside once again towards 2,450 or even lower, which is not our favoured view.

We will now reassess the wave counts, as prices have crossed over above 2,370-2,400.

A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive. As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,460or even lower to 2,225, and then subsequently rise towards a medium to long-term target at 3,600, which could bring this current impulse to an end. The medium to long-term expectation that we have been having is slowly materialising and the impulse wave is underway.

But, a short-term fall below 2,800 now has caused doubts on our overall bullish expectations. We will have to closely watch the important resistances in the 2,900-3,000 range for any directional call going forward.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting that the bearishness is still intact. Only a crossover again above the zero line could hint at a bullish revival now.

Therefore, look for palm oil futures to test support levels and rise higher again.

Supports are at MYR 2,645, 2,595 and 2,575. Resistances are at MYR 2,690, 2,720 and 2,745.

The writer is the Director of Commtrendz Research. There is risk of loss in trading.

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