Malaysian palm oil futures ended higher on Monday, supported by a slightly weakening ringgit and improving demand. Palm oil exports from Malaysia, the world’s second largest producer, weakened 2-5 per cent in the first half of March versus the corresponding period in February, according to shipment data from SGS.

CPO active month June contract moved lower as per expectations. As mentioned in the previous update, intermediate supports could be seen at MYR 2,360-70/tonne from where some retracement can be expected in the coming sessions. Though prices have bounced off near those lows, a bottom still seems unlikely here, as there are no clear signs of a turnaround yet. Near-term supports are at 2,400 followed by 2,350-60 levels in the coming sessions. Failure to hold support here could take prices lower to 2,185-2,255 zone too, from where it can rebound subsequently. Any upticks to 2,450-55 could cap upside attempts now. Only a direct rise above here could take prices higher towards 2,535 again being a strong resistance levels. Only a close above 2,540 could revive bullish hopes.

The favoured view now expects that while MYR 2,465/tonne caps the upside, we can expect more downside to 2,310-15 levels, and a close below here could open the downside to even 2,250 subsequently.

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 impressive. We expected prices to push higher towards 2,645 initially and then correct lower towards 2,425 or even lower to 2,225and then subsequently rise towards a medium- to long-term target at 3,600. But, a short-term fall below MYR 2,800/tonne levels now has caused doubts on our overall bullish expectations. The present up move from 2,425 looks impulsive with potential targets around 2,945-50, while 2,585 holds. The equality target for the present up move lies around 3,120-25. But, a fall below 2,530 has changed the counts and we will review it in the next update.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at bearishness to be intact. Only a crossover again above the zero line could hint at a bullish reversal again.

Therefore, look for palm oil futures to test the resistance levels and then decline .

Supports are at MYR 2,410, 2,360 and 2,310. Resistances are at MYR 2,465, 2,535 and 2,570.

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

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