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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday tracking declines in competing markets, while data showing an increase in shipments from Malaysia in June and a new Indonesian export levy did not help much.
Exports of palm oil products from the world’s second-biggest producer for June 1-15 rose 5.8 per cent to 780,387 tonnes from 737,308 tonnes shipped during May 1-15, cargo surveyor Intertek Testing Services said .
CPO active month August futures are moving on expected lines. As mentioned earlier, an inverted head and shoulder was confirmed on the break of MYR 2,226/tonne, which is a bullish sign with targets near 2,375-85 range, a potential technical objective in the short-term. Prices came close to it and have corrected lower from there. Important support is now at 2,250 followed by 2,210-20 levels now. While these support holds, we can expect the upside momentum to continue in the short-term again and retest recent highs at MYR 2,375/tonne or even higher. Only a decline below 2,185, could hint at weakness again, and such a move could revive bearish expectations once again. Favoured view expects prices to initially decline and find supports mentioned above and then gradually edge higher again.
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 anticipated earlier. We are now tracking a final leg of a 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 above the zero line of the indicator again hinting at a bullish trend. Only a crossover again below the zero line could hint at a resumption of the bearish trend.
Therefore, look for palm oil futures to test supports initially and then rise again.
Supports are at MYR 2,250, 2,220 and 2,185. Resistances are at MYR 2,300, 2,365 and 2,400.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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