Malaysian palm oil futures on the Bursa Malaysia Derivatives were higher on Monday as a weaker ringgit and improving exports supported the market. Palm oil shipments from Malaysia showed rising export demand for the first half of April, even with an export tax in place.

Cargo surveyor data showed improving shipments between 7 and 20 per cent from the first half of March, lifted by demand to China and India.

CPO active month July futures are moving perfectly in line with our expectations. As mentioned in the previous update, finally, a much needed correction in underway, which is a healthy sign of a market which could scale newer heights in the coming months.

Supports at MYR 2,610-20/tonne, being a very strong rising trend line support zone has held well, and a stronger pullback from there today has revived bullish hopes. The ideal target for CPO futures in the coming weeks beyond the near-term resistance at 2,800-25, lies near 2,875-95 levels.

Only an unexpected decline below MYR 2,585 levels, also being an important support point, could cause doubts on our bullish view. Such a fall though not expected could see prices drifting lower again towards 2,508 followed by 2,460-65 levels where strong supports are noted again. The trigger for such a fall will be seen on a close below 2,600 in the coming week, which we do not favour. Our favoured view expects prices to stay above the support levels mentioned above and the uptrend to resume again.

Wave counts: A possible new impulse looks to have started again. One of our targets at MYR 1,850/tonne 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 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. The medium to long-term expectation that we have been having is slowly materializing and we will watch for any signs of exhaustion in the above zone.

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 are still above the zero line of the indicator hinting a bullish trend to be intact. Only a crossover again below the zero line could hint at a reversal in trend to bearish.

Therefore, look for palm oil futures to test the support levels and then rise again.

Supports are at MYR 2,625, 2,610 and 2,545. Resistances are at MYR 2,720, 2,785 and 2,850.

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

Related Topics
comment COMMENT NOW