Malaysian palm oil futures on the Bursa Malaysia Derivatives ended sharply lower on Monday, as weakness in overnight soya complex dented the sentiment. Reports from cargo surveyors Intertek Testing Services and Societe Generale de Surveillance showed exports of Malaysian palm oil products from July 1-25 rose about 15 per cent from the same time period last month, led by improved demand from Europe and China.

CPO active month October futures are moving in line with our expectations. As mentioned earlier, prices could get capped in the above mentioned resistances and then edge lower again.

As expected, resistances at MYR 2,317-20/tonne followed by important resistance at 2,375-80 levels capped the upside attempts.

Nearer supports are now at 2,255 followed by 2,225 levels. Failure to hold supports here could hint at further weakness ahead.

A fall below MYR 2,200 could aim for 2,088-90 levels on the downside before finding good support from there. This is our favoured expectation.

Only a direct rise above 2,350 on a closing basis could hint at resumption of the uptrend, which could potentially stretch to test 2,450 levels, or even higher, which does not look likely. Resistances are now seen at MYR 2,300/tonne levels followed by 2,345-50 levels.

What looks more likely is that prices could get capped in the above mentioned resistances and then edge lower towards nearer supports 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 2,900, which could bring this current impulse to an end.

The medium- to long-term expectation that we have been having is slowly materialising and we will watch for any signs of a possible impulse wave in the making.

Any dips could prove to be opportunity to participate in the upcoming uptrend. However, the picture could turn weak below MYR 2,200/tonne levels. RSI is in the neutral zone now indicating that it is neither oversold nor overbought.

As mentioned in the earlier updates, the averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal in trend. Only a crossover again above the zero line could hint at a bullish reversal in trend.

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

Supports are at MYR 2,245, 2,200 and 2,085. Resistances are at MYR 2,300, 2,345 and 2,400.

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

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