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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday with the market driven up by strong gains in the soya complex and fears that dryness due to the El Nino weather pattern will cut yields. CPO active month February futures rose higher as expected.
As mentioned earlier, prices have been gradually inching lower but have not given up the bullish picture yet. As hinted earlier, price structures are now turning friendly again, with hopes of a retest of the MYR 2,400/tonne levels or even higher to 2,435-45 in the coming sessions.
Close above important resistance at 2,460 could take prices towards the psychological resistance zone between MYR 2,500 and MYR 2,510 levels or even higher. Support is now seen at 2,400 followed by 2,335 levels. However, failure to cross the resistance at 2,460 , could see prices correcting lower to 2,300 levels.
We still feel support levels could hold and prices could once again attempt to rise . This is still our favoured view. Only an unexpected decline below 2,260 could hint that the expected rise from supports might not materialise. Such a decline could open the downside again targeting 2,200-20 levels or even lower, which we do not favour.
We will now reassess the wave counts, as prices have crossed over above 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 resistance levels.
Supports are at MYR 2,400, 2,375 and 2,260. Resistances are at MYR 2,460, 2,510 and 2,585.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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