The Crude Palm Oil (CPO) prices have been inching higher over the last couple of weeks. The CPO futures contract on the Multi Commodity Exchange has risen over 3 per cent from ₹550 per 10 kg. The contract is currently trading at around ₹570. The upmove in the last two weeks have turned the short-term outlook bullish for the contract.

Outlook

The recent bounce over the last two weeks from ₹550 levels is technically significant. The MCX-CPO contract was in a strong uptrend last year since August. The contract rallied about 25 per cent from a low of ₹475.2 in August and made a high of ₹592 in last November. The sharp pull-back from this high halted at a low of ₹543 in December. Technically, the 38.2 per cent Fibonacci retracement support at ₹547 has halted this fall. After a brief consolidation around this support for a few weeks, the contract has started to move up again. This indicates the resumption of the uptrend that had begun in last August. The current upmove can extend in the coming weeks and target ₹595 or ₹600. The region between ₹595 and ₹600 is a crucial long-term resistance. Whether the contract manages to breach this hurdle or not will be key in deciding the next trend.

A strong break above ₹600 will boost the momentum. Such a break will increase the likelihood of the current rally extending to ₹620 and ₹630.

On the other hand, if the contract reverses lower from ₹600, a pull-back down move to ₹550 is possible again. The outlook will turn bearish if the contract breaks below ₹550. Such a break can take the contract lower to ₹530 initially. Further break below ₹530 will increase the selling pressure. In such a scenario, the contract can tumble to ₹510 or even to ₹500 on the back of profit booking.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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