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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended sharply higher on Monday tracking a jump in overseas soya oil markets and further underpinned by strong exports for May. A weak ringgit also underpinned prices.
Exports of Malaysian palm oil products for May rose 44.7 per cent to 1,553,281 tonnes from 1,073,482 tonnes in April, cargo surveyor Intertek Testing Services said on Monday. CPO active month August futures are have broken out of the broad range and are moving higher as expected.
As mentioned earlier, price structures now suggest a possible upside rally in CPO futures towards MYR 2,275/tonne levels. An inverted head and shoulder was confirmed on the break of 2,226 , which is a bullish sign with targets near 2,375 range. The psychological resistance at 2,300 could be an immediate barrier followed by 2,320 levels. Once above here, it could even target MYR 2,385 levels, a potential technical objective in the short-term.
Despite this strength, there is still no evidence of a clear bullish reversal yet. Important support is at 2,250 followed by 2,210-20 levels now.
While this support holds, we can expect some upside momentum to continue in the short-term and test above mentioned targets. Only a decline below 2,190, could hint at weakness now, and such a move could revive bearish expectations again.
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 a final leg of a 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 have gone above the zero line of the indicator again hinting at a bullish trend.
Only a crossover again below the zero line could hint at a resumption of the bearish trend.
Therefore, look for palm oil futures to test the resistance levels.
Supports are at MYR 2,245, 2,210 and 2,175. Resistances are at MYR 2,300, 2,325 and 2,375.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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