Malaysian palm oil futures on Monday ended lower despite initial gains in rival oilseed soy, and cargo surveyor data showing stronger export demand.

CPO active month October futures moved in line with our expectations. As mentioned earlier, unexpected rise and close above 2,585 MYR/tonne could be the ideal signal for a larger up move towards 2,700-25. The bullish reversal we had anticipated has materialised in decent volumes, which makes us believe that the trend in the near-term has turned bullish.

However, the weekly charts are yet to give up the bearishness. Therefore, though we expect a recovery in the short-term, it could turn out to be short-lived. Only a close above 2,610 could hint at further strength for 2,685-2,700 or even higher.

As illustrated in the earlier updates, though, it looks like the short- to medium-term has turned bearish, the bigger picture still favours bullishness ahead.

The big picture still indicates neutral tendencies and a chance of a revival in bullishness from critical support points. As expected, we saw a recovery higher from the lows of 2,425. Failure to follow through higher could see prices being attracted towards 2,445, which could force us to abandon any chances of a bullish recovery, and could subsequently take prices lower to the next critical support at 2,420, or even lower to 2,355 now. Favoured view expects prices to inch higher in the coming sessions.

We will now reassess the wave counts, as prices have crossed over 2,370-2,400 . A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive. As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,425or 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 caused doubts on our overall bullish expectations. We will have to closely watch the important supports in the 2,350-2,400 range for any directional call going forward. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. Positive divergences in indicators hint at a bullish reversal ahead. The averages in MACD have gone above the zero line of the indicator, hinting at a bullish reversal. Only a crossover again below the zero line could signal bearishness again.

Therefore, look for palm oil futures to test the resistance levels.

Supports are at MYR, 2,510, 2,465 & 2,425 Resistances are at MYR 2,575, 2,620 & 2,685.

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

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