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Malaysian palm oil futures ended sharply higher on Monday to rise over 1 per cent in the second session, as market participants forecast improving demand in January and lower production in the coming months.
CPO active month March moved higher as expected. As mentioned earlier, though the near-term picture still looks mixed with a mild bearish bias in the short-term, it still does not show any major change in the big picture which is still friendly.
The upward retracement from 2,420 MYR/tonne has been impressive with good volumes, making us believe a possible intermediate bottom is in place. A close above 2,560, a previous support that was broken when prices went to 2,420, has further instilled bullish hopes.
Today's price action of finding support exactly from there should see prices testing 2,652 MYR/tonne a minor resistance on its way up, with a stronger one around $2685-2700 MYR/tonne levels. The 2615-2715 is a gap that was created earlier, which could potentially get filled . As illustrated earlier, despite the corrective declines from time to time, the bigger picture bullish trend still remains intact. Though it looks like a head and shoulder has been confirmed, such a pattern coming after a recent double bottom has more chances to fail, which is why we are still holding on to a medium-term bullish outlook.
Dips to 2,575 followed by 2,550 is expected to hold supports in the coming week. Favoured view still expects, while prices hold above supports in the broader picture, it could eventually inch higher in the coming sessions.
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 2,645initially and then correct lower in a corrective pattern towards 2,425or 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. The present up move from 2,425 looks impulsive with potential targets around 2,945-50 while 2,585 holds.
The equality target for the present up move lies around 3,120-25. But a fall below 2,530 has changed the counts and we will review it in the next update. 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 at a bearish to be intact. Only a crossover again above the zero line could hint at a bullish reversal again.
Therefore, look for palm oil futures to test the resistance levels in the coming sessions.
Supports are at MYR, 2,560, 2,520 & 2,475 Resistances are at MYR 2,652, 2,685 & 2,720.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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