Malaysian palm oil futures on the Bursa Malaysia Derivatives hit a one-week low on Fridayon slowing exports and stronger Malaysian ringgit. Exports of Malaysian palm oil products for January fell 9.7 per cent to 1,149,255 tonnes from 1,272,150 tonnes shipped during December, cargo surveyor Societe Generale de Surveillance said on Monday. Stockpiles in Malaysia as of end-December were at 2.6 million tonnes – down from the record 2.9 million tonnes a month ago.

CPO active month April futures are moving in line with our expectations. Prices hit the resistance around MYR 2,525/tonne levels before retracing lower from there. As we have been maintaining, though the decline in the previous weeks looked to continue further, the trend still remains bullish and our favoured view expects support levels at 2,400 followed by 2,360-65 could still hold and prices could once again attempt to rise higher. Supports are now seen at 2,410-20 levels. Only an unexpected decline below MYR 2,355/tonne could hint that the expected rise above 2,520-30 might not materialise. Such a decline could open the downside again targeting 2,365 levels or even lower to 2,325 levels. Favoured view expects a corrective decline to supports levels and then prices to rise higher again towards a technical objective near 2,630-40 levels in the coming weeks.

We will now reassess the wave counts, as prices have crossed over above MYR 2,370-2,400 per tonne. 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 2,405, 2,375 and 2,350. Resistances are at MYR 2,455, 2,495 and 2,520.

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

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