Palm oil to test resistance

Gnanasekaar T | Updated on January 16, 2018 Published on October 31, 2016


Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday on declining exports, weakness in the soya oil futures and lack of any further bullish cues.

Exports of Malaysian palm oil products for October 1-31 fell 6.4 per cent to 1,288,894 tonnes in September, cargo surveyor Intertek Testing Services said.

CPO active month January futures are moving broadly in line with our expectations. As mentioned earlier, we are seeing adequate confirmation of a bullish reversal that has materialised. The medium- to long-term picture also continues to exhibit bullish tendencies.

Strong supports are now seen at MYR 2,750-65/tonne range followed by 2,730 levels and while supports hold, prices are expected to edge higher again towards important near-term resistance at 2,935-45 levels or even higher in the coming sessions.

A downward correction is expected after a test of 2,945-50 zone, failing which the rally could get wings to take out the psychological resistance at 3,000 levels also.

In the medium-term picture, there is scope for this uptrend to turn into a very strong one even targeting 3,120-3,200 levels. But, this could happen only after some corrective declines.

Favoured view expects a minor consolidation in the 2,700-2,800 range followed by a strong rally higher again. Unexpected decline below 2,720 could postpone the bullishness.

Such a fall could see stronger supports around 2,665-70 on levels being a very important medium-term support level.

Wave counts: 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 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 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 the resistance levels.

Supports are at MYR 2,750, 2,720 and 2,670. Resistances are at MYR 2,820, 2,900 and 2,945.

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

Published on October 31, 2016
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