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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday after palm oil futures jumped to their highest since mid-February lifted by last week’s forecasts of slowing output before dropping back to even with the previous close. CPO active month May futures moved perfectly in line with our expectations. As mentioned in the previous update, as the trend still remains strong both on the short-term and medium-term, we expect supports to hold again and edge higher again. Prices moved exactly in line with our expectations. Supports are now seen at MYR 2,550-65/tonne levels. The big picture still favours more upside while corrective dips to support levels hold. Favoured view still expects supports levels at to hold 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.
Only an unexpected decline below MYR 2,520 levels could cause doubts on our bullish view. Such a fall though not expected could see prices drifting lower again towards 2,460-65 levels where strong supports are noted again.
We will now reassess the wave counts, as prices have crossed over above MYR 2,370-2,400/tonne. 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 MYR 2,900/tonne, 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 move higher again.
Supports are at MYR 2,550, 2,520 and 2,465. Resistances are at MYR 2,625, 2,645 and 2,695.
The author is the Director of Commtrendz Research. There is risk of loss in trading.
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