Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday, hitting 15-month highs, helped by weather concerns and support from other edible oil markets.

However, the current strength in the ringgit and news from the official Malaysian Palm Oil Board to temporarily halt palm product imports from Indonesia due to high stocks levels may hamper market sentiment.

CPO active month December futures are moving higher in line with our expectations. As mentioned in the previous update, we expect prices to hold supports in the coming sessions for a test of important near-term resistance at MYR 2,430/tonne followed by the psychological 2,500 levels.

Potential even exists for the present rally to stretch even to 2,645-50. Only, a fall below 2,345 levels could postpone the bullishness. Such a fall could push prices to near-term supports at 2,250-65 .

In the coming week, we expect prices to correct lower on the back of mild overbought conditions and subsequently consolidate with a bullish bias and inch higher towards initial resistances towards 2,500-30 levels. A potential technical target is near 2,645 post the resistance at 2,500-30 .

We will now reassess the wave counts, as prices have crossed over above MYR 2,370-2,400/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 overbought zone now indicating a downside correction in the offing.

As mentioned in the earlier update, the averages in MACD have gone above the zero line of the indicator hinting a bullish reversal. Only a crossover again below the zero line could hint at a resumption of the bearish trend.

Therefore, look for palm oil futures to test the resistance levels and then correct lower.

Supports are at MYR 2,370, 2,325 and 2,265. Resistances are at MYR 2,495, 2,530 and 2,600.

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

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