Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday after Greece rejected terms of a bailout package, raising risk of a global financial crisis.

Edible oil markets are awaiting data on palm oil production, exports and stocks due to be released by the Malaysian Palm Oil Board later this week.

CPO active month September futures are moving in a volatile range. As mentioned earlier, while short-term supports at MYR 2,210-20/tonne holds, we can expect the upside momentum to continue again. However, prices have not been able to clear the 2,280-85 range, which is now a strong obstacle for CPO futures to rise higher. Present price structures suggest more chances of a decline in the coming sessions towards 2,205-10 or even lower to 2,175-80 levels. Only a decline below MYR 2,185 could hint at weakness again, and such a move could revive bearish expectations for a decline towards 2,105 levels, which we do not favour presently.

Favoured view expects prices to consolidate in a broad range and find supports mentioned above and then gradually edge higher again. The bigger picture seems to be turning gradually friendly despite recent volatility and due to that we are giving up on the broad bearish view we have had in the medium to long-term picture. We will have to once again review the wave counts, but will wait for a cross over above MYR 2,400/tonne to do that. Till then we will stick to our earlier assessment.

As mentioned earlier, a downtrend again could be confirmed on a close below 2,175 levels. This once again puts the spot light on the MYR 1,700/tonne mark, which we anticipated earlier.

We are now tracking the final leg of an impulse in a declining trend with potential targets near 1,850 or even lower to 1,700 levels.

Ideally, the next leg of a larger up move could potentially begin from this area. But a direct rise above MYR 2,500 in huge volumes could indicate a turnaround suggesting a possible move to 2,800 later in the year.

RSI is in still the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator again hinting at a bullish trend. Only a crossover again below the zero line could hint at a resumption of the bearish trend.

Therefore, look for palm oil futures to correct lower initially and then rise again.

Supports are at MYR 2,210, 2,180 and 2,151. Resistances are at MYR 2,265, 2,285 and 2,325.

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

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