Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday supported by the increase in soya oil prices and a weaker ringgit.

CPO active month January futures moved perfectly in line with our expectations. As mentioned earlier, the overall bullishness was not disturbed, despite the recent fall in prices, and our view bullish view has been vindicated.

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. Te medium to long-term picture also continues to exhibit bullish tendencies.

Strong supports are now seen at MYR 2,650-65/tonne range and while supports hold, prices are expected to edge higher once again back towards 2,795-2,825 levels or even higher in the coming sessions.

A minor correction is expected around 2,795-2,825 zone, failing which the rally could get wings to touch the psychological resistance at 2,900-10 levels. In the medium-term picture there is scope for this uptrend to turn into a very strong one even targeting 3,200 levels.

But, this could happen post a downward correction once again to around 2,575-2,600 levels. Unexpected decline below 2,550 could dash any bullish hopes. Favoured view expects a strong rally higher and any corrective dips to find supports mentioned above.

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 2,900-25 , which could bring this current impulse to an end. The medium- to long-term expectation, that we have been having is slowly materialising and the impulse wave is under way.

We have maintained for several weeks now that any dips could prove to be opportunity to participate in the upcoming uptrend.

However, the picture could turn weak if prices unexpectedly went below 2,400 levels now. RSI is in the neutral zone now indicating that it is neither overbought nor oversold.

The averages in MACD are 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 MYR 2,675, 2,620 and 2,575. Resistances are at MYR 2,795, 2,825 and 2,910.

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

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