Palm oil to test supports, rise

Gnanasekaar T | Updated on January 23, 2018 Published on April 27, 2015

Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday to their lowest in nearly two weeks on Monday, mainly pressured by the ringgit.

Concerns over rising output continue to pressure prices. This is despite rising exports which was not seen in earlier months. Cargo surveyor Intertek Testing Services reported that shipments for April 1-25 rose 5.6 per cent from a month earlier to 904,112 tonnes, while another cargo surveyor Societe Generale de Surveillance showed exports for the same period rose 7.1 per cent.

CPO active month July futures, after seesawing in the broad range, is on the verge of a sharp decline that we have been anticipating for long. As mentioned in the previous update, failure to follow-through higher above MYR 2,180/tonne could pressure prices lower again.

Even though prices did move up close to 2,200, as cautioned in the earlier update, it is unlikely that a sustained upward rally could materialise subsequently. The bigger picture has turned decisively weak now.

Any upticks should find resistance near 2,160-65 levels, followed by 2,185 levels. Decline below MYR 2,095 could hint at weakness again and such a move could revive bearish expectations again and revive hopes of a test of medium-term targets at 1,900 levels.

The MYR 2,085 a tonne has been holding for the fourth time in the past six months and is a critical level to watch out for.

A close below this level with good volumes will hint at the beginning of strong downtrend towards 1,900 levels or even lower.

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 levels.

This once again puts the spotlight on the MYR 1,700/tonne 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 up move could potentially begin from this area.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold.

The averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal again.

Only crossover again above the zero line could hint at a resumption of the bullish trend.

Therefore, look for palm oil futures to test the support levels.

Supports are at MYR 2,085, 2,045 and 2,005.

Resistances are at MYR 2,155, 2,185 and 2,220.

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

Published on April 27, 2015
This article is closed for comments.
Please Email the Editor