Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday, retracing from a two-month high reached in the previous session, as tepid demand for palm and weak crude oil prices capped gains.

Palm oil shipments from Malaysia, the world’s second largest producer, dropped 12.4 per cent to 1.5 million tonnes in November, according to government data last Thursday.

CPO active month February futures rose higher as expected. As mentioned earlier, price structures are now turning friendly again, with hopes of a retest of the MYR 2,400/tonne levels or even higher to 2,435-45 in the coming sessions. But, failure to cross the critical 2,445-50 mark for the second time in the last few weeks could result in loss of confidence.

Potential exist for a corrective dips to 2,375-80 levels before pushing higher again. Close above important resistance at 2,460 , in needed to take prices towards the psychological resistance zone between 2,500-2510 levels or even higher. Support is now seen at 2,375-85 followed by 2,320 levels.

We still feel support levels could hold and prices could once again attempt to rise higher, as the underlying trend remains strong. This is still our favoured view. Only an unexpected decline below 2,260 could hint that the expected rise to 2,500 might not materialise.

Such a decline could open the downside again targeting 2,200-20 levels or even lower, which we do not favour.

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 test the resistance levels.

Supports are at MYR 2,375, 2,345 and 2,315. Resistances are at MYR 2,450, 2,510 and 2,575.

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

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