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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended marginally lower on Monday eyeing the negative impacts of a possible default by Greece on its debt repayment.
CPO futures have fallen about 2 per cent so far in June and touched a three-week low last week, before recovering from there again. CPO active month September futures are moving on expected lines.
As mentioned earlier, while short-term supports at MYR 2,210-20/tonne holds, we can expect the upside momentum to continue again in the short-term and retest recent highs at 2,375 or even higher.
Prices structures favour the upside in the short-term. A gentle consolidation in the MYR 2,220-85/tonne range can be seen before prices start moving higher again.
Only a decline below 2,185 could hint at weakness again and such a move could revive bearish expectations for a decline lower towards MYR 2,105/tonne levels, which we do not favour presently.
Favoured view expects prices to consolidate in a broad range and find supports mentioned above and then gradually edge higher again.
The bigger picture seems to be turning gradually friendly and due to that we are giving up on the broad bearish view we have had in the medium to long-term picture.
We will have to once again review the wave counts, but will wait for a crossover above MYR 2,400/tonne to do that. Till then we will stick to our earlier assessment.
As mentioned earlier, a downtrend again could be confirmed on a close below 2,175 levels.
This once again puts the spot light on the MYR 1,700/tonne mark, which we anticipated earlier. We are now tracking the final leg of an impulse in a declining trend with potential targets near 1,850 or even lower to 1,700 levels.
Ideally, the next leg of a larger up move could potentially begin from this area.
But a direct rise above MYR 2,500 in huge volumes could indicate a turnaround suggesting a possible move to 2,800 later in the year.
RSI is in still the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator again hinting at a bullish trend.
Only a crossover again below the zero line could hint at a resumption of the bearish trend.
Therefore, look for palm oil futures to consolidate and then rise again.
Supports are at MYR 2,225, 2,210 and 2,175. Resistances are at MYR 2,285, 2,325 and 2,375.
The author is the Director of Commtrendz Research. There is risk of loss in trading.
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