Malaysian palm oil futures on the Bursa Malaysia Derivatives rose to a one-week high in early trade on Monday, lifted by weaker-than-expected output and short-covering ahead of public holidays. CPO active month September futures are moving in line with our expectations. As mentioned earlier, a fall below MYR 2,420/tonne could see prices testing the next crucial support around 2,330-35 levels in the short-term, where it is expected to find a possible near-term bottom. Prices have bounced exactly higher from there. The present recovery could see prices testing the important resistance around 2,475-80 levels ideally. As illustrated earlier, a possible head-and-shoulder pattern has been confirmed on a break below 2,475 , which is quite a bearish sign. Resistances are at 2,475 followed by a strong one at 2,550 levels now. The chart picture indicates a possible near-term bottom made at 2,317 . Since the momentum still favours further declines, our favoured view expects prices to edge lower again after the pullback fails to cross near-term resistances. This is our favoured expectation. Only an unexpected rise above 2,575 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 2,460 or even lower to 2,225 , 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 materializing 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. However, the picture could turn weak below 2,200 levels. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. As mentioned in the earlier updates, the averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal in trend. 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.

Supports are at MYR 2,375, 2,320 and 2,285. Resistances are at MYR 2,475, 2,525 and 2,575.

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

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