Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday due to tepid demand amid higher production, although a weaker ringgit arrested the slide to some extent. Export data from cargo surveyors showed gains of 2-4 per cent for the first 15 days of November compared with a month before. Exports of Malaysian palm oil products for November 1-15 rose 1.8 per cent to 703,768 tonnes, cargo surveyor Societe Generale de Surveillance said.

CPO active month February futures moved lower against expectations. As mentioned in the previous update, while supports hold near MYR 2,300-10/tonne levels, potential exists for further upside. After failing to follow-through higher above 2,385-90 , key supports have been broken yet again. price structures now hint at a fall to 2,215-30 levels in the coming sessions. Good support will be noticed there. However, failure to hold support here could see prices dropping even lower to 2,145 levels. but, we feel 2,200-20 levels could hold and prices could once again attempt to rise . This is our favoured view. Only an unexpected decline below 2,200 could hint that the expected rise from supports might not materialise. Such a decline could open the downside again targeting 2,140 levels or even lower to 1,995 levels.

We will now reassess the wave counts, as prices have crossed over above MYR 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 test the support levels and rise again.

Supports are at MYR 2,275, 2,220 and 2,145. Resistances are at MYR 2,345, 2,395 and 2,425.

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

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