Malaysian palm oil futures on the Bursa Malaysia Derivatives ended sharply higher on Friday, posting their first weekly gain after eight consecutive weekly declines, on the back of other commodity markets and a weaker ringgit. A weaker Malaysian ringgit also helped the commodity as it makes palm cheaper for physical buyers.

. Exports of Malaysian palm oil products for August fell 1.2 per cent to 1,525,389 tonnes, from 1,543,868 tonnes shipped during July, cargo surveyor Intertek Testing Services said on Monday.

As mentioned in the previous update, though prices have bounced from a long-term rising trend line support level, it is difficult to confirm if a bottom has been made, as the price action does not confirm a bottom yet. Break and close below MYR 1,900-10/tonne could have further bearish implications. The next important levels to watch out for CPO futures is at 1,820-25 followed by 1,720. While 1,925-35 holds, we can expect prices to inch further higher towards 2,050-65 levels, where it is expected to find strong resistance. Only a close above MYR 2,020/tonne levels could revive any hopes of a bullish turnaround. In the coming week, we expect prices to consolidate with a bearish bias and eventually cross above MYR 2,025/tonne levels being a strong near-term resistance.

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 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 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 still below the zero line of the indicator hinting at a bearish trend going forward also. 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 rise again.

Supports are at MYR 1,935, 1,865 and 1,750. Resistances are at MYR 2,020, 2,055 and 2,075.

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

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