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Malaysian palm oil futures on BMD were higher Monday, and hit a two-year high rising for a sixth session out of eight, on persistent worries that a crop-damaging El Nino weather event would curb yields.
CPO active month June futures moving perfectly in line with our expectations. As mentioned in the previous update, further upside to a potential equality target at 2,800-15 MYR/tonne is possible in the coming months.
As we have maintained in the previous update, though, any corrections could see rapid selling pressure, the trend remains strongly bullish and such dips could prove to be short-lived.
The correction we expected has been shallow and making higher tops and bottom, a sign of healthy uptrend. Supports are at 2,725 followed by 2,650. The ideal target for CPO futures in the coming weeks beyond the psychological 2,800 lies near 2,875-95 levels. Only an unexpected decline below 2,540-50 levels, also being a rising trend line support point, could cause doubts on our bullish view.
Such a fall though not expected could see prices drifting lower again towards 2,460-65 levels where strong supports are noted again.
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 overbought zone now indicating a possible correction is in the offing.
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, 2,725, 2,655 & 2,545 Resistances are at MYR 2,785, 2,820 & 2,895.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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