Malaysian palm oil futures on Bursa Malaysia Derivatives ended higher on Monday after export data showed a surge in demand in the first 10 days of the month and the ringgit weakened. But gains were capped due to higher carryover stocks and higher production.

Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm oil products during May 1-10 rose 41.3 per cent from the same period in April to 458,677 tonnes as shipments to India and Europe doubled, with buyers snapping up duty-free cargoes of crude palm oil. CPO active month July futures pulled back higher from recent lows and are gradually making a recovery higher.

As mentioned earlier, the MYR 2,085/tonne range has been holding for the fourth time in the past six months and is a critical level to watch out for.

Though prices broke it on an intra-day basis and went lower towards 2,070 levels, it closed higher above 2,102 levels indicating strong buying support in that zone.

Price structures now suggest a possible upside rally in CPO futures towards 2,250-55 levels, where it is expected to find strong resistance.

Once a close above here could see prices revisiting MYR 2,300/tonne levels or even higher.

However, there is still no evidence of a clear bullish reversal yet. Important support is at 2,130-35 levels now.

While this support holds, we can expect some upside in the short-term. Decline below 2,100 could hint at weakness now, and such a move could revive bearish expectations again and revive hopes of a test of medium-term targets at 1,900 levels.

We will have to once again review the wave counts, but will wait for a crossover above MYR 2,400/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 levels. This once again puts the spot light on the 1,700 mark, which we anticipated earlier. We are now tracking the final leg of an impulse in a declining trend with potential targets near 1,850 or even lower to 1,700 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 still below the zero line of the indicator hinting at bearishness to be intact.

Only crossover again above the zero line could hint at a resumption of the bullish trend.

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

Supports are at MYR 2,150, 2,120 and 2,070. Resistances are at MYR 2,200, 2,245 and 2,285.

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

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