Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday, as sentiment remained subdued ahead of MPOB data expected to show higher production, stocks and lower exports.

CPO active month September futures are moving in line with our expectations. As mentioned earlier, the chart picture indicates a possible near-term bottom made at MYR 2,317/tonne. But, since the momentum still favours further declines, our favoured view expected prices to edge lower again after the pullback fails to cross near-term resistances.

The bounce has been short-lived and prices fell lower with a huge gap. The Fibonacci retracement point at 2,220-2,222 is the final support holding prices from falling further lower.

The present price structures do not hint at a possible bottom yet. As illustrated earlier, a possible head-and-shoulder pattern has been confirmed on a break below 2,475 , which is quite a bearish sign.

Resistances are at 2,317-20 followed by 2,400 levels. From present levels major declines look unlikely. Unexpected fall below 2,200 could aim for 2,088-90 levels on the downside before finding good support from there. This is our favoured expectation. Only an unexpected rise above 2,400 on a closing basis could hint at resumption of the uptrend, which could potentially stretch to test 2,600 levels, or even higher.

We will now reassess the wave counts, as prices have crossed over above 2,370-2,400 . 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 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 , which could bring this current impulse to an end.

The medium- to long-term expectation that we have been having is slowly materialising and we will watch for any signs of a possible impulse wave in the making.

Any dips could prove to be opportunity to participate in the upcoming uptrend. However, the picture could turn weak below 2,200 levels.

RSI is in the oversold zone now indicating that it is oversold and a possible upward correction is in the offing.

As mentioned in the earlier updates, the averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal in trend. Only a crossover again above the zero line could hint at a bullish reversal in trend.

Therefore, look for palm oil futures to test the supports and rise again.

Supports are at MYR 2,220, 2,150 and 2,088. Resistances are at MYR 2,315, 2,375 and 2,470.

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

Related Topics
comment COMMENT NOW