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Malaysian palm oil futures rebounded from a one-week low lifted by prospects of better export demand.
CPO active month May contract is moving in line with our expectations. As mentioned earlier, the trend line support at MYR 2,445/tonne has held attempts to decline. A close above 2,550 is needed to confirm further upside to 2,595 followed by 2,620-25 in the coming sessions. But, so far, volumes have not been significant, which does not give confidence on the up move. However, in the bigger picture, the 2,695-2,725 is a gap that was created earlier, which could potentially get filled.
As illustrated earlier, despite the corrective declines from time to time, the bullish trend still remains intact. Though, it looks like a head and shoulder has been confirmed, such a pattern coming after a recent double bottom has more chances to fail, which is why we are still holding on to a medium-term bullish outlook. Only a direct fall below, 2,420-25 could see prices testing 2,360-70 another important technical support and then retrace higher subsequently. The favoured view still expects further upside, while prices hold above supports at 2,455 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 push higher towards 2,645 initially and then correct lower towards 2,425or even 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 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 supports and then rise in the coming sessions.
Supports are at MYR 2,475, 2,445 and 2,420. Resistances are at MYR 2,555, 2,620 and 2,640.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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