Palm oil futures test resistances

Gnanasekaar T | Updated on January 15, 2018 Published on April 03, 2017

Malaysian palm oil futures were up on Monday, rising from a near six-month low and snapping two sessions of losses as they gained strength from rival soya oilseed, weaker production outlook and rising exports. Though production growth could rise in line with the seasonal trend, it is expected to be lower than expectations. Production in February declined 1.4 per cent month-on-month, according to data from the Malaysian Palm Oil Board, the industry regulator. March data is scheduled for release on April 10. Exports of Malaysian palm oil products for March rose 6.9 per cent to 1,088,677 tonnes from 1,018,604 tonnes shipped in February, cargo surveyor Societe Generale de Surveillance said on Friday.

CPO active month June futures edged higher from recent lows. As mentioned before, we can expect more weakness and any upticks could be short-lived. Resistance will be noted around 2,685-95 MYR/tonne followed by a stronger one around 2,735-45 and these levels could repulse any upside attempts. Only a close above 2,900 could reignite bullish hopes again. Ideally, prices are expected to hit 2,490-2,510 in the coming sessions. This 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 resistances in the 2,820-25 zone again. As illustrated in the 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 bullish trend from critical support points. The short-term momentum has turned bearish.

We will now reassess the wave counts, as prices have crossed 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 2,460 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 resistances in the 2,900-3,000 for any directional call going forward. RSI is in the neutral zone now, indicating that it is neither oversold nor overbought. The averages in MACD are below the zero line of the indicator hinting 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 the resistances and then decline lower again.

Supports are at MYR, 2,645, 2,600 & 2,525 Resistances are at MYR 2,690, 2,745 & 2,820.

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

Published on April 03, 2017
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