Palm oil futures will consolidate, rise

Gnanasekaar T | Updated on August 06, 2018

Malaysian palm oil futures edged up on Monday evening tracking strength in related edible oils and charting a second straight session of gains. Rising production and stocks continue to weigh on market sentiment.

Exports of Malaysian palm oil products for July fell 0.8 per cent to 1,049,970 tonnes from last month’s 1,058,832 tonnes, cargo surveyor Societe Generale de Surveillance said.

It is too early to change the medium- to long-term view to bullish again, but a possible double bottom formation and other statistical indications point to a possible intermediate bottom at MYR 2,140/tonne levels.

Prices could consolidate in the region of 2,175-2,220 and then break higher towards 2,275-80. A close above 2,300 could reinforce bullish expectations. The favoured view in the bigger picture expects that while downticks to 2,175 or even lower to 2,145-50 hold, we can expect more upsides in the coming sessions.

For now, we favour resistances around 2,235 followed by 2,275-80 in the coming sessions. In the big picture, we still anticipate more declines to 2,100 in the coming months.

Wave counts: 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. We expected prices to push higher towards 2,645 initially and then correct lower to 2,425 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 bullish expectations have been dented on a fall below 2,655. This makes us believe that the high at 3,105 was an end off an impulse and the targets are near 2,200 or even lower, where the equality target is expected to be tested. Only a close above 2,640 could alter the wave counts again, which is not our favoured scenario now.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting at a bearish reversal. Only a crossover again above the zero line could hint at a bullish reversal.

Therefore, look for palm oil futures to consolidate and rise again.

Supports are at MYR 2,175, 2,145 and 2,110. Resistances are at MYR 2,235, 2,275 and 2,310.

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

Published on August 06, 2018

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