Crude palm oil futures on the Bursa Malaysia Derivatives ended marginally higher on Monday, as weakness in the ringgit and gains in the soya complex bolstered the sentiment. A weaker ringgit tends to rekindle demand hopes as higher end-stocks ahead of the increasing production season continue to worry traders. Benign demand and a record soyabean harvest continue to pressure CPO futures. Figures from last week showed strength in Malaysian palm exports in the first 10 days of April, which rose 29.4 per cent from the same period the previous month, according to cargo survey company Societe Generale de Surveillance. CPO active month June futures are lower as key support levels have been breached. As mentioned in the previous update, a direct fall below MYR 2,140/tonne levels could hint at a failure to follow-through higher and such a move could revive bearish expectations again and revive hopes of a test of medium-term targets at MYR 1,900 levels. The bigger picture has turned decisively weak now. Any upticks should find resistance near MYR 2,150-75 now. However, in the coming sessions, while MYR 2,085 holds, there is a chance for price to move higher and test resistances at MYR 2,175-2,200/tonne range.

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. A close below this level with good volumes will hint at the beginning of strong downtrend towards MYR 1,900/tonne levels or even lower.

We will have to once again review the wave counts, but will wait for a crossover above MYR 2,400 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 MYR 2,175 levels. This once again puts the spot light on the MYR 1,700/tonne mark, which we anticipated earlier. We are now tracking a final leg of an impulse in a declining trend with potential targets near MYR 1,850 or even lower to MYR 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 have gone below the zero line of the indicator hinting at a bearish reversal again. Only crossover again above the zero line could hint at a resumption of the bullish trend.

Therefore, look for palm oil futures to test resistance levels and then decline again.

Supports are at MYR 2,120, 2,085 and 2,025. Resistances are at MYR 2,150, 2,185 and 2,245.

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

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