Malaysian palm oil futures on Bursa Malaysia Derivatives ended higher on Friday, reversing some losses of the previous session after the ringgit eased a little. However, hopes of a lower-than-expected rise in stocks lifted prices to help palm oil post its second weekly rise in a row. A minor rise in production growth in October, along with robust demand, is expected to keep stocks below the psychological level of two million tonnes this year. Cargo surveyor data showed that exports of Malaysian palm oil in the first half of October rose to between 7,81,043 tonnes and 7,99,853 tonnes, some 7-12 per cent higher from a month earlier. Market players will be waiting for export data for the October 1-20 period, due on October 21, to gauge further demand. Energy prices tanked as US inventory data pointed to a well-supplied market, denting sentiment for the edible oil complex.

CPO active month futures moved to match expectations. As mentioned in the previous update, a push above 2,415 Malaysian ringgit a tonne (MYR/t) could revive bullish hopes again for a move above 2,500 MYR/t or even higher. Supports at 2,360-65 MYR/t are seen as holding prices for a push towards 2,475-85 MYR/t levels in the coming week.

However, this could be a significant resistance to surpass in the near-term. As mentioned earlier, the technical picture is increasingly pointing towards a bullish market ahead contradicting prevailing fundamentals. An inverted head-and-shoulder pattern is in the making, targeting highs at 2,600-2,700 MYR/t levels. Break and close above 2,495 MYR/t could be the trigger for such a rise.

For the time being, we will stick to the current wave counts. Only a close below 2,270 MYR/t could force a review of the counts once again. The present decline has met an intermediate wave target at 2,135 MYR/t and the subsequent impulse characteristics of the present move make us believe that it could exhaust near 2,500 MYR/t levels and then a subsequent decline to 2,345-50 MYR/t levels.It looks like the anticipated decline materialised. Further to this decline, a sharp third wave move looks likely for 2,575-2,600 MYR/t in the coming months. RSI is in the neutral zone indicating that it is neither overbought nor oversold.

The averages in MACD have once again gone above the zero line of the indicator, hinting at a bullish reversal now. Only a crossover below the zero line again could again hint at weakness.

Therefore, look for palm oil futures to consolidate and then rise.

Supports are at MYR, 2,365, 2,330 and 2,270. Resistances are at MYR 2,425, 2,475 and 2500.

(The author is Director of Commtrendz Research and is also on the advisory panel of Multi-Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own. This analysis is based on historical price movements and there is risk of loss in trading. He can be reached at >gnanasekar.t@gmail.com .)

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