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Malaysian palm oil futures on the Bursa Malaysia Derivatives ended lower on Monday on profit-taking. Palm oil demand from India, the world’s largest consumer of vegetable oils, dropped nearly 36 per cent in November from a month earlier, data from the Malaysian Palm Oil Board showed.
CPO active month March futures are moving perfectly in line with our expectations. As mentioned earlier, in the medium-term picture there is scope for this uptrend to turn into a very strong one even targeting MYR 3,120-3,200/tonne levels, a potential medium-term target area. As expected prices hit 3,200 levels and then corrected from there. Intermediate resistance will be at 3,185-3,200 levels now.
Ideally, prices could edge lower now to 3,065-75 levels, being a rising trendline support point. Such correction are healthy for the uptrend to sustain by squeezing out weak longs. Only an unexpected decline below 3,025-35 could lead to a stronger correction. Such a fall could see stronger supports around 2,930-50 levels being tested. A one-sided move without price corrections could be vulnerable for a sharp decline subsequently.
Favoured view still expects prices to inch higher towards 3,250 in the coming sessions after the downward correction tests support levels 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 3,600 , which could bring this current impulse to an end.
RSI is in the neutral zone now indicating that it is neither overbought nor oversold. Divergences in indicators warn of a sharp corrective decline lower in the coming sessions. The averages in MACD are still 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 support levels.
Supports are at MYR 3,075, 3,025 and 2,960. Resistances are at MYR 3,175, 3,205 and 3,250.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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