Malaysian palm oil futures on the Bursa Malaysia Derivatives were lower as the ringgit strengthened to its strongest level in more than a week. Palm oil production rises seasonally in the second and third quarters of the year, adding to stockpiles and capping gains on palm prices. Malaysian shipments gained 11-15 per cent for May versus a nearly 5-7 per cent decline in April, cargo surveyors said last week.

CPO active month August futures are moving in line with our expectations. As mentioned earlier, we still view the downward correction as a healthy one within a larger bullish trend. In the bigger picture, we still see a good chance of prices moving back towards MYR 2,800/tonne levels. As mentioned earlier, daily close above 2580 MYR/ton has opened the way for further gains to 2,650-75 levels and this is line with the overall bullish view of ours. This level will tend to support any corrective dips now. The present levels at 2,665-75 are a minor resistance followed by stronger resistance around 2,715-20 levels. Ideally, we expect prices to correct lower from above mentioned resistance towards MYR 2,625/tonne or even lower to 2,575-80 levels.

Favoured view expects prices to edge higher towards resistances and then correct lower subsequently. Only an unexpected rise above MYR 2,725 on a closing basis could hint at resumption of the uptrend, which could potentially stretch to test 2,790-2,800 levels, or even higher.

Wave counts: 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. As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards MYR 2,460/tonne or even lower to 2,300 and then subsequently rise towards a medium to long-term target at 2,900, which could bring this current impulse to an end. The medium to long-term expectation that we have been having is slowly materialising and we will watch for any signs of a possible impulse wave in the making. 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 have gone below the zero line of the indicator hinting at a bearish reversal in trend. But, the crossover tends to happen in a correction and again a bullish crossover can materialize again. Only a crossover again above the zero line could hint at a bullish reversal in trend.

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

Supports are at MYR 2,625, 2,575 and 2,550. Resistances are at MYR 2,675, 2,720 and 2,745.

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

Related Topics
comment COMMENT NOW