Malaysian palm oil futures fell to their lowest in more than five months on Monday in a third consecutive session of losses, weighed down by weakness in other oils and a stronger ringgit.

CPO active month June futures pulled back higher from recent lows. As mentioned before, break below 2,820 MYR/tonne zone on the active third month contract triggered a wave of selling in CPO futures and it will act as a strong resistance barrier in the coming sessions. Prices briefly went to 2,839 before heading lower again. Presently, we can expect more weakness and any upticks could be short-lived. Resistance will be noted around 2,740-45 levels. Only, a close above 2,900 could reignite bullish hopes again.

Break below critical support at 2,685-95 could drag prices lower to the next important support around 2,490-2,510 zone in the coming sessions. This happens to be a long-term rising trend line support level. Once, it finds an intermediate bottom in the above mentioned range, ideally prices could pullback towards resistances in the 2,820-25 again. 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 bullish trend from critical support points.

The short-term momentum has turned clearly bearish and abandon any hopes of upward rallies anytime soon. We will now reassess the wave counts, as prices have crossed over above 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 2,460 or even lower to 2,225 , and then subsequently rise towards a medium to long-term target at 3,600 MYR/ton, which could bring this current impulse to an end.

The medium to long-term expectation, that we have been having is slowly materializing and the impulse wave is underway. 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 resistances in the 2,900-3,000 for any directional call going forward. RSI is in the neutral zone now indicating that it is neither oversold nor overbought.

The averages in MACD are below the zero line of the indicator hinting that the bearishness is still intact. Only a crossover again above the zero line could hint at a bullish revival now. Therefore, look for palm oil futures to test the support levels. Supports are at MYR, 2,675, 2,600 & 2,525 Resistances are at MYR 2,745, 2,768 & 2,820.

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

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