Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday on fears of demand weakening. Exports of Malaysian palm oil products for October 1-15 fell 8.6 per cent to 691,064 tonnes from 756,429 tonnes shipped during September 1-15, cargo surveyor Societe Generale de Surveillance said on Thursday. However, El-Nino conditions could still provide good support going forward. CPO active month January futures are moving in line with our expectations. As mentioned in the previous update, present prices structures do not suggest immediate strength. Prices could spend some time in the MYR 2,220-2,350/tonne range, before pushing higher eventually. Short-term resistances are around 2,345-50 levels. The bigger picture has turned neutral to bullish, which means, any dips to supports could find good support. Strong support will be seen at 2,185-95 levels followed by crucial support at MYR 2,095/tonne, and this level is very important to keep the bullish trend intact. While the above supports hold, a potential technical target is near 2,645 post the resistance at 2,500-30. Any rallies to 2,295-2,325 zone could be short-lived and favoured view expects prices to edge lower initially towards 2,215-20 followed by 2,185 levels. Only an unexpected rise above MYR 2,340/tonne could hint that the expected corrective decline might not materialise, which is not our favoured view.

We will now reassess the wave counts, as prices have crossed over above MYR 2,370-2,400/tonne. A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive. The current move could push higher towards 2,645 initially and then it could correct lower in a corrective pattern towards 2,310 or even lower to 2,250 and then subsequently rise towards a medium to long-term target at 2,900, which could bring this current impulse to an end. But, this is clearly a medium to long-term expectation and not to be mistaken for a short-term view. Any dips could prove to be opportunity to participate in the upcoming uptrend. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. As mentioned in the earlier update, the averages in MACD have gone above the zero line of the indicator hinting a bullish reversal. 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 the support levels.

Supports are at MYR 2,245, 2,195 and 2,135. Resistances are at MYR 2,325, 2,355 and 2,400.

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

Related Topics
comment COMMENT NOW