Palm oil to test resistance, slip

Gnanasekaar T | Updated on January 22, 2018 Published on December 21, 2015

Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday, to a near three-month high on Monday, as concerns that drier weather could curb output boosted prices.

Palm shipments from two cargo surveyors showed on Monday a near 25 per cent drop in exports from December 1-20 compared with the same time a month ago.

CPO active month March futures are higher in line with our expectations. As mentioned earlier, potential exist for a corrective dips to MYR 2,375-80 a tonne levels to hold before pushing higher again. Prices broke the support but recovered well from there keeping the uptrend intact.

Close above important resistance at 2,460 , in needed to take prices towards the psychological resistance zone between 2,500-2,510 levels or even higher. The prices having found support at lower levels could gradually edge higher and test the psychological level at 2,500 or even higher. Support is now seen at 2,400-05 followed by 2,385 levels.

Our favoured view expects support levels could hold and prices could once again attempt to rise higher, as the underlying trend remains strong. Only an unexpected decline below 2,300 could hint that the expected rise to 2,500-10 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 2,405, 2,375 and 2,345. Resistances are at MYR 2,465, 2,510 and 2,575.

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

Published on December 21, 2015

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