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Palm oil futures on Bursa Malaysia Derivatives ended sharply higher on Monday on weather concerns as floods in the country’s key producing regions added to supply concerns. Severe monsoon flooding in Malaysia has forced a large number of people to evacuate and this is expected to cause higher-than-expected disruption in palm oil production. However, exports are not impressive and continue to be lacklustre. Cargo surveyor ITS estimated that exports of Malaysian Palm oil products during December 1-25 fell 2.3 per cent compared with the same period last month. Another cargo surveyor SGS reported that exports fell 1.4 per cent.
CPO active month March futures pushed higher breaking key resistance levels. As cautioned in the earlier update, an unexpected move above 2,217 MYR/tonne levels could revive bullish hopes again. Such a move, though not favoured, could see a retest of 2,300 MYR/tonne levels again. The short-term picture seems to have turned bullish again with immediate targets near 2,350-65 MYR/tonne levels. Failure to hold resistances here could see prices rising as high as 2,510-2,520 MYR/tonne levels, being a falling trendline resistance point as well as an equality target.
Supports will now be seen at 2,250 MYR/tonne levels followed by 2,235 MYR/tonne levels. Ideally, we expect prices to get capped in the 2350-65 MYR/tonne range and a consolidation can be seen before attempting to rise higher. Only a fall below 2,145 MYR/tonne will hint at weakness again, which is not our favoured view now.
We will have to review the wave counts, but will wait for a crossover above 23,565 MYR/tonne to do that. Till then, we will stick to our earlier assessment. As mentioned earlier, a downtrend again could be confirmed on a close below 2,175 MYR/tonne levels. This once again puts the spotlight on the 1,700 MYR-tonne mark, which we anticipated earlier. We are now tracking a final leg of an impulse in a declining trend with potential targets near 1,850 MYR/tonne or even lower to 1,700 MYR/tonne levels. Ideally, the next leg of a larger up move could potentially begin from this area. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator, hinting at a bearish reversal.
Only a crossover again above the zero line again could hint at a resumption in the bullish trend.
Therefore, look for palm oil futures to test the resistance levels.
Supports are at MYR 2250, 2220 & 2152 Resistances are at MYR 2351, 2425 & 2500.
(The writer is the Director of Commtrendz Research and there is risk of loss in trading. )
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