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Malaysian palm oil futures snapped four sessions of losses on the Bursa Malaysia Derivatives on the back of improved demand and a technical market retracement.
The benchmark third month contract has been on the decline in line with our expectations.
As mentioned earlier, though prices have bounced off intermediate supports, but it appears more like a retracement and not a sign of a clear bottom yet. As any attempts to pullback has not seen any meaningful follow-through higher. As we have been maintaining, it is too early to change the medium to long term view to bullish again. A pullback to MYR 2,240-45/tonne looks likely now with chances of an extension even to 2,300 . Prices have come close to a long-term support point at 2,110 around 2,144 .
The price structure does not yet confirm a bottom in place. So, we expect another fall to 2,110-20 after the upward retracement to levels mentioned above. The favoured view in the bigger picture expects that while upticks to 2,370 or even higher to 2,420-25 caps, we can expect more downside breaking 2,110 being a long-term rising trendline support level.
However, a close above 2,385 could revive bullish hopes. For now, we favour resistances around 2,245-50 range to cap for a retest of lows around 2,240 or even lower in the coming sessions.
Wave counts: 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. As mentioned earlier, we expected prices to edge up towards 2,645 initially and then correct lower towards 2,425 or even lower to 2,225 , 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 2,640 could alter the wave counts again, which is not our favoured scenario now.
RSI is in the oversold zone now indicating an upward correction in the offing. The averages in MACD are below the zero line of the indicator hinting at bearish reversal. Only a crossover again above the zero line could hint at a bullish reversal.
Therefore, look for palm oil futures to test the resistance levels and then decline lower again.
Supports are at MYR 2,145, 2,110 and 2,085. Resistances are at MYR 2,245, 2,295 and 2,310.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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