Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday, before hitting their highest level in nearly 21 months, weighed down by weaker-than-expected export data. Palm oil shipments from Malaysia fell in the first half of February, dropping 16.1 percent compared with a month ago, according to Intertek Testing Services.

CPO active month April futures moved perfectly in line with our expectations. Prices went above the potential target area near MYR 2,630/tonne levels, which we have been maintaining for the past few months. As we have been maintaining, the trend still remains bullish and our favoured view expects support levels to hold and prices to rise again. Exhaustion signs seen in the chart could push prices initially lower towards 2,550-60 or even lower to 2,515-20 levels in the coming week. Only an unexpected decline below 2,445 could hint at a stronger fall towards 2,405-10 levels. As the trend remains strong, we expect supports to hold again and edge higher again.

Favoured view expects a corrective decline to supports levels and then prices to rise again towards our next technical objective near 2,690-2,700 levels in the coming weeks or even higher to a potential equality target at 2,800-15 in the coming months.

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. The current move could push higher towards 2,645 initially and then it could correct lower in a corrective pattern towards 2,310 or even lower to 2,250 , and then subsequently rise towards a medium to long-term target at 2,900 , which could bring this current impulse to an end.

But, this is clearly a medium to long-term expectation and not to be mistaken for a short-term view. Any dips could prove to be opportunity to participate in the upcoming uptrend. RSI is in the neutral zone now indicating that it is neither overbought nor oversold.

As mentioned in the earlier update, the averages in MACD are above the zero line of the indicator hinting a bullish trend to be intact. Only a crossover again below the zero line could hint at a reversal in trend to bearish. Therefore, look for palm oil futures to correct lower.

Supports are at MYR, 2,550, 2,520 and 2,465. Resistances are at MYR 2,625, 2,650 and 2,695.

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

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