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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday after Malaysian palm oil stocks rose to 2.27 million tonnes in July due to higher production and a slowdown in demand, figures from an MPOB, indicated. Cargo surveyor SGS estimated exports of Malaysian palm oil products for August 1-10 rose 57.5 per cent.
CPO active month October futures declined sharply. Failure to find support at MYR 2,050/tonne levels, a strong support has dashed any bullish hopes. Any pullbacks to 2,085-2,100 levels could come in for strong resistance.
Direct fall below recent low at MYR 2,006 could be the trigger for a test of our long-term targets near MYR 1,900/tonne levels or even lower. This could mean that the pullback might not materialise. The big picture has turned weaker, but short-term rallies towards 2,100 or even higher to 2,145 are expected.
We expect the long-term targets near 1,910-20 range to be tested and a possible bottom from there, which happens to be a long-term rising trend line support level. Only a close above MYR 2,175/tonne levels could revive any hopes of a bullish turnaround. We will have to once again review the wave counts, but will wait for a crossover above MYR 2,400/tonne to do that.
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 were expecting 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 2,500 in huge volumes could indicate a turnaround suggesting a possible move to MYR 2,800/tonne later in the year.
RSI is in still the oversold zone now indicating a possible upward correction in the offing. The averages in MACD are below the zero line of the indicator again hinting at a bearish trend going forward. Only a crossover again above the zero line could hint at a resumption of the bearish trend.
Therefore, look for palm oil futures to test the support levels and then move higher. Supports are at MYR 2,005, 1,950 and 1,920. Resistances are at MYR 2,085, 2,135 and 2,175.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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