Palm oil to test supports, rise

Gnanasekaar T | Updated on October 15, 2018 Published on October 15, 2018

Malaysian palm oil futures fell from a one-week high on Monday, as export data indicated weaker shipments. The benchmark third month December contract bounced higher from support levels as expected. It needs to be seen if prices can sustain and push higher above important resistances. Important support is now at 2,150-60 . A break below here could open the downside for 2,110-15 where a long-term rising trend support kicks in. The bigger picture price structure does not yet confirm a bottom in place. But, a close above MYR 2,300 could reinforce bullish expectations and alter the bearish picture.

We are of the view that that the underlying bigger trend continues to be bearish and any upticks could be short-lived and prices could decline subsequently. We need to see clear evidence of a bullish reversal accompanied by volumes. For now, we favour resistance to kick-in around 2,210-40 or even higher to 2,275-80 to cap upside attempts. The existing broad consolidation could continue between 2,110 and 2,240 in the coming sessions. As per the price structure, a break below 2,110seems possible with potential targets around 1,870 on the downside. But, it is not our favoured view. Only a daily close above 2,300 could alter the big picture view that was gradually changing to bullish after the double bottom formation around 2,140 .

Wave counts: A possible new impulse looks to have started again. One of our targets at 1,850was 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 towards 2,100 , and then subsequently rise towards a medium to long-term target at 3,600 , which could bring this current impulse to an end. The medium- to long-term bullish expectations have been dented on a fall below 2,655. Only a close above 2,350 could alter the wave counts again, which is not our favoured scenario now.

RSI is in 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 bearish to be intact. Only a crossover again above the zero line could hint at a bullish reversal.

Therefore, look for palm oil futures to test support levels and then rise.

Supports are at MYR 2,175, 2,150 and 2,110. Resistances are at MYR 2,220, 2,245 and 2,300.

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

Published on October 15, 2018
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