Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday on worries of weakening demand, but losses were capped by a slump in the ringgit to a nine-year low and supported by Malaysia’s plans to lift its biodiesel mandate to 10 per cent by October. Exports of Malaysian palm products in May had surged higher sharply from a month ago, although it is doubtful that the strong demand can be sustained going forward too.

CPO active month August futures have broken out of the broad range and are moving higher as expected. As mentioned earlier, an inverted head and shoulder was confirmed on the break of MYR 2,226/tonne, which is a bullish sign with targets near 2,375-85 range, a potential technical objective in the short-term. Stronger resistance is seen at MYR 2,410/tonne. A close above here could lead prices even higher towards MYR 2,500/tonne levels. The big picture charts are turning friendly now. Important support is at 2,250 followed by 2,220-25 levels now. While this support holds, we can expect the upside momentum to continue in the short-term and test above mentioned targets. Only a decline below MYR 2,190/tonne, could hint at weakness again, and such a move could revive bearish expectations once again.

We will have to once again review the wave counts, but will wait for a crossover 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 MYR 2,175/tonne levels. This once again puts the spot light on the 1,700 mark, which we anticipated earlier. We are now tracking a 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 upmove could potentially begin from this area. But a direct rise above 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 test the resistance levels.

Supports are at MYR 2,300, 2,275 and 2,225. Resistances are at MYR 2,385, 2,410 and 2,495.

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

Related Topics
comment COMMENT NOW