Malaysian palm oil futures closed higher on Monday, but gave up most of the gains on expectations of falling stocks. Exports increased because of higher consumer demand ahead of the start of the Islamic holy month of Ramadan.

CPO active month September futures regained their bullish undertone, but would need to still cross an important resistance to warrant any signs of a bullish reversal.

As mentioned before, a fall below 2,580 MYR/tonne triggered the weakness and this will be a strong resistance zone going forward.

Near-term resistance is now at 2,548-50. As illustrated in the earlier updates, though, it looks like the short to medium-term has turned bearish. However, the bigger picture still favours bullishness ahead. The big picture still indicates neutral tendencies and a chance of a revival in the bullish trend from critical support points.

As expected, we saw a recovery from the lows of 2,426. An unexpected rise and close above 2,585 could be the trigger for a larger upward move towards 2,700.

On the other hand, a direct fall below 2,435 could force us to abandon any chances of a bullish recovery, which could subsequently take prices lower to the next critical support at 2,420 or even lower to 2,355. The favoured view expects supports to hold for a recovery higher in the coming sessions.

Wave counts

We will now reassess the wave counts. 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 2,425 or 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.

Our medium to long-term expectation is slowly materialising and the impulse wave is under way. 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 supports in the 2,350-2,400 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 still 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.

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

Supports are at MYR 2,465, 2,425 and 2,355. Resistances are at MYR 2,545, 2,580 & 2,610.

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

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