Palm oil futures on Bursa Malaysia Derivatives exchange ended lower marginally on Friday, as the discount to rival soya oil rose to a two-year high. However, fundamentals remained weak as stocks are expected to rise above a 16-month high of two million tonnes hit in May. Cargo surveyor Societe Generale de Surveillance said June 1-15 Malaysian palm oil exports jumped 16.2 per cent to 6,99,674 tonnes from a month ago. Demand was driven mostly by China as well as the Indian subcontinent, which has a sizable Muslim population, and needs to restock ahead of Ramadan. Malaysia's palm oil output expanded 13.7 per cent to 1.74 million tonnes in May from April, reaching the highest level in 19 months, the Malaysian Palm Oil Board said on June 10 capping any major gains.

CPO futures are moving in line with our expectations. As mentioned in the previous update, fall below 3,405 Malaysian ringgit (MYR) a tonne resulted in a double top pattern with potential targets near 3,250 MYR/tonne. Fall below 3,250 MYR/tonne has revived bearish hopes once again for 3,025 MYR/tonne. Immediate support is at 3,125-45 MYR/tonne for September futures now. Favoured view now expects advances to be capped in the 3,245-3,275 MYR/tonne range for an initial fall towards 3,135-45 MYR/tonne levels. A mild bounce higher can be seen from there. Subsequently, it could attempt to test 3,025 MYR/tonne our favoured level which has been eluding us so far.

We believe the impulse that began from 1,427 MYR/tonne, which hit 4,486 MYR/tonne ended and a prolonged corrective move has possibly ended at 1,335 MYR/tonne. In the big picture, a new impulse began from 1,335 MYR/tonne and the third wave with a projected objective of 3,900 MYR/tonne has been met. Unlike in the previous update, we counted the fall towards 3,133 MYR/tonne as an end of wave “A” now and not the wave “C” as anticipated earlier. A corrective wave “B” has met one potential target near 3,465 MYR/tonne. A wave “C” kind of a decline looks likely with potential to test 2,600 MYR/tonne. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator again indicating strong bearishness ahead.

Therefore, look for palm oil futures to test the support levels and then bounce higher.

Supports are at MYR 3,175, 3,125 and 3,025. Resistances are at MYR 3,245, 3,285 and 3,350.

(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at > )