Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday on expectations that stockpiles will remain tight in the near-term.

Exports of Malaysian palm oil products for September 1-15 fell 11 per cent to 668,288 tonnes from 750,942 tonnes shipped during the same period last month, said cargo surveyor Societe Generale de Surveillance.

CPO active month December futures have been moving perfectly in line with our expectations. As mentioned earlier, a close above MYR 2,675-80 levels could see prices testing 2,725/tonne levels being another significant resistance followed by 2,765 , which could trigger a major bullish trend going forward.

A broad consolidation is still under way in the 2,480-2,650 range and the recent decline looks healthy and needed to sustain this up trend. Very strong support is seen at 2,545-50 levels followed by 2,520 and 2,480 levels now.

As illustrated earlier, the bigger picture has gradually turned friendly and shows bullish tendencies, and now, we are seeing adequate confirmation of a bullish reversal that has materialized. While, supports mentioned above holds well, strong resistance at 2,750-60 levels are expected to tested in the coming sessions.

In the medium-term picture, there is scope for this uptrend to turn into a very strong one even targeting 3,200 levels. Only an unexpected decline below 2,470 could postpone the bullishness.

Wave counts: 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 2,900-2,925 , which could bring this current impulse to an end.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal in trend. Only a crossover again below the zero line could hint at weakness again.

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

Supports are at MYR2,620, 2,575 and 2,545. Resistances are at MYR 2,725, 2,765 and 2,800.

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

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