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Malaysian palm oil futures on Monday rose slightly at the close of trade, recovering from the previous session's losses, as gains in stronger-performing soyoil boosted sentiment.
CPO active month August futures broke key support levels and dashed any bullish hopes that we have nurtured.
As mentioned before, a fall below 2,580 MYR/tonne triggered weakness and this will be a strong resistance zone going forward. 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 the bullish trend from critical support points. As expected, we saw a minor recovery from the lows of 2,470.
An unexpected rise and close below 2,610 could cause doubts once again on the present bearish trend.
On the other hand, a direct fall below 2,485 could force us to abandon any chances of a recovery from there, taking it lower to the next critical support at 2,420 or even lower to 2,355 now.
Wave countsWe will now reassess the wave counts, as prices have risen 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 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.
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 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 now.
Therefore, look for palm oil futures to test support levels. Supports are at MYR 2,485, 2,450 & 2,420. Resistances are at MYR 2,545, 2,580 and 2,610.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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