Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday, but pared all gains made during the day as the government data showed stockpiles at a record high.

Data from the Malaysian Palm Oil Board showed September stockpile levels peaking, while production slowed from August. Exports of Malaysian palm products for October 1-10 fell 11.25 per cent from the same time period a month ago, said cargo surveyor Intertek Testing Services on Saturday.

CPO active month December futures are moving higher in line with our expectations. As mentioned in the previous update, the technical picture is turning gradually friendly now and a genuine reversal in trend could be underway.

As predicted earlier, we expected prices to correct lower initially on the back of mild overbought conditions and subsequently consolidate with a bullish bias and inch higher towards initial resistances towards MYR 2,500-30/tonnes levels. But, present prices structures do not suggest immediate strength. Prices could spend some time in the 2,225-2,350 range, before pushing higher eventually. Short-term resistances are around 2,345-50 levels.

The bigger picture has turned neutral to bullish, which means, any dips could find good support. Strong support will be seen at 2,195-98 levels followed by crucial support at 2,130-35 , and this is very important to keep the bullish trend intact. While the above supports hold, a potential technical target is near 2,645 post the resistance at 2,500-30 .

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 have gone above the zero line of the indicator hinting a bullish reversal. 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 support levels and then move higher again.

Supports are at MYR 2,250, 2,198 and 2,135. Resistances are at MYR 2,345, 2,377 and 2,425.

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

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