Palm oil futures to move higher

Gnanasekaar T | Updated on January 22, 2018

Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday, retreated from a one-year high, after hitting their highest in 18 months in the last session, as weaker export demand and concerns over the year-end monsoon season dampened market sentiment. Palm oil export data from cargo surveyors Intertek Testing Services and Societe Generale de Surveillance showed a 15-16 per cent drop in shipments from December 1-25 compared with the same time period a month ago.

CPO active month March futures are higher in line with our expectations. As mentioned earlier, close above important resistance at MYR 2,460/tonne, in needed to take prices towards the psychological resistance zone between 2,500-2,510 levels or even higher and prices having found support at lower levels could gradually edge higher and test the psychological level at 2,500 or even higher.

Prices came close to testing the psychological resistance and then corrected sharply lower from there. The correction could extend lower towards 2,405-10 levels or even lower. Support is now seen at 2,400-05 followed by 2,385 levels.

Our favoured view expects support levels could still hold and prices could once again attempt to rise higher, as the underlying trend remains strong. Only an unexpected decline below 2,350-60 could hint that the expected rise to 2,500-10 might not materialise.

Such a decline could open the downside again targeting 2,300-20 levels or even lower. Favoured view expects a corrective decline to supports mentioned above then prices to rise higher again.

We will now reassess the wave counts, as prices have crossed over above 2,370-2400 . 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 initially and then move higher again.

Supports are at MYR 2,410, 2,375 and 2,345. Resistances are at MYR 2,475, 2,510 and 2,575.

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

Published on December 28, 2015

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