Malaysian palm oil futures on the Bursa Malaysia Derivatives rose about 2 per cent during the day, posting their highest intra-day levels in more than a week, with gains in rival oils and a weaker ringgit providing support.

CPO active month February futures are moving perfectly in line with our expectations. In the medium-term picture there is scope for this uptrend to turn into a very strong one even targeting MYR 3,120-3,200 per tonne levels, a potential medium-term target area.

But, we expect a strong downward correction which stalled at the 2,815-20 level itself. Near-term resistance is seen strong at 2,950-65 on the upside. Failure to cross this level could have bearish implications. Only an unexpected decline below 2,805 could postpone the bullishness. Such a fall could see stronger supports around 2,775-80 being tested, followed by 2,750, also a very important medium-term support level, which could potentially turn the picture neutral to bearish.

The favoured view still expects prices to inch up towards 2,950-65 levels or even higher, while the supports mentioned above hold.

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 MYR 2,645/tonne 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 3,125 , which could bring this current impulse to an end.

The medium- to long-term expectation that we have been having is slowly materialising and the impulse wave is under way. We have maintained for several weeks now that any dips could prove to be an opportunity to participate in the upcoming uptrend.

However, the picture could turn weak if prices unexpectedly went below 2,400 levels now. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator, hinting at a bullish reversal in trend. Only a crossover again below the zero line could hint at weakness again.

Therefore, look for palm oil futures to test resistance levels again. Supports are at MYR 2,845, 2,800 and 2,750. Resistances are at MYR 2,960, 3,030 and 3,100.

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

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