Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday, weighed down by higher September end-stocks. Malaysia’s palm oil stocks at end-September rose 5.7 per cent to 1.55 million tonnes (mt) from 1.46 mt at the end of August, industry regulator the Malaysian Palm Oil Board (MPOB) said on Monday.

Output rose by a marginal 0.8 per cent from the previous month to 1.72 mt, while September exports fell 20.4 per cent to 1.45 mt. Palm oil shipments gained 10.8 per cent from the corresponding period last month, according to data from cargo surveyor Intertek Testing Services.

CPO active month December futures declined as expected. As mentioned earlier, a fall below MYR 2,575-80/tonne levels has changed the picture to neutral but it is still not bearish.

As illustrated earlier, the bigger picture has gradually turned friendly and shows bullish tendencies, and now, we are seeing adequate confirmation of a bullish reversal that has materialised. In the near-term the picture has turned neutral, but the medium- to long-term picture still continues to exhibit bullish tendencies.

Strong supports are now seen at 2,460-85 and while the supports hold, prices are expected to edge higher once again back towards 2,760-70 or even higher in the coming sessions.

In the medium-term, there is scope for this uptrend to turn into a very strong one even targeting MYR 3,200/tonne levels. But this could happen after a downward correction, which we feel is presently under way. A rise and close above 2,645 could help revive bullish hopes again.

Wave counts: One of our targets at 1,850 was met. The rally from there looks very impressive. We expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,460 or even lower to 2,225 and then subsequently rise towards a medium to long-term target at 2,900-25, which could bring this current impulse to an end.

Our medium- to long-term expectation is slowly materialising and we are midway of that impulse wave in the making.

We have maintained for several weeks now that any dips could prove to be opportunity to participate in the upcoming uptrend. However, the picture could turn weak if prices unexpectedly went below MYR 2,400/tonne levels now.

RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator, hinting at a bullish reversal in trend.

Only a crossover again below the zero line could hint at weakness. Therefore, look for palm oil futures to test the support levels and then rise again.

Supports are at MYR 2,525, 2,475 and 2,400. Resistances are at MYR 2,600, 2,645 and 2,700.

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

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