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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday, after data from the Southern Palm Oil Millers Association which showed a 2.6 per cent output rise for the first 20 days of February compared with the same period in January.
CPO active month May futures moved perfectly in line with our expectations.
Prices went above the potential target area near MYR 2,630/tonne levels, which we have been maintaining for the past few months.
As mentioned in the previous update, exhaustion signs seen in the chart could push prices initially lower towards 2,550-60 or even lower to 2,515-20 levels.
Subsequent to the correction, we expect prices to start edging higher again.
Only an unexpected decline below 2,445 could hint at a stronger fall towards 2,405-10 levels.
As the trend remains strong, we expect supports to hold again and edge higher again.
Favoured view expects a corrective decline to supports levels and then prices to rise higher again towards our next technical objective near 2,690-2,700 levels in the coming weeks or even higher to a potential equality target at 2,800-15 in the coming months.
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. The current move could push higher towards 2,645 initially and then it could correct lower in a corrective pattern towards 2,310 or even lower to 2,250, and then subsequently rise towards a medium to long-term target at 2,900, which could bring this current impulse to an end.
But, this is clearly a medium to long-term expectation and not to be mistaken for a short-term view.
Any dips could prove to be opportunity to participate in the upcoming uptrend. RSI is in the neutral zone now indicating that it is neither overbought nor oversold.
As mentioned in the earlier update, the averages in MACD are above the zero line of the indicator hinting a bullish trend to be intact.
Only a crossover again below the zero line could hint at a reversal in trend to bearish.
Therefore, look for palm oil futures to correct lower and then move higher again.
Supports are at MYR 2,550, 2,520 and 2,465. Resistances are at MYR 2,625, 2,650 and 2,695.
The writer is the Director of Commtrendz Research.There is risk of loss in trading.
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