Palm oil will test supports, rise

Gnanasekaar T | Updated on January 09, 2018

Palm Oil

Malaysian palm oil futures ended lower on Monday in line with the weakness in soya oil due to oversupply. CBOT soya oil witnessed a third session of decline following a US Department of Agriculture crop report released last week.

CPO active month January futures are correcting lower as expected. The bigger picture continues to display bullish tendencies and we still expect prices to eventually rise higher. As cautioned earlier, mild exhaustion signs are noticed that could see prices correcting lower to MYR 2,745-50/tonne levels, being a rising trend line support point from where the uptrend could resume again. Stronger supports are at 2,730-35.

Ideally, while these supports hold, we can expect prices to edge higher again. Only a fall and close below 2,670 would hint at weakness, again targeting 2,610-15 levels from where it could once start a fresh up-move.

Dips to MYR 2,745-50 followed by 2,735-40 are expected to hold support in the coming week. The favoured view still expects that while prices hold above 2,605-10 range in the broader picture, it could eventually inch up towards targets mentioned above in the coming sessions.

Wave counts: As mentioned earlier, we expected prices to push higher 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 expectation that we have been having is slowly materialising and the impulse wave is under way. But a short-term fall below 2,800 now has cast 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 levels.

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 that the bullishness is intact. Only a crossover again below the zero line could hint at bearishness. Therefore, look for palm oil futures to test support levels and then rise in the coming sessions.

Supports are at MYR 2,750, 2,730 and 2,670. Resistances are at MYR 2,825, 2,855 and 2,905.

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

Published on November 13, 2017

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