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Malaysian palm oil futures on the Bursa Malaysia Derivatives hit a two-week low, recording a second straight session of declines, as prices were weighed down by prospects of improving levels in production.
CPO active month April futures are still stuck in a range, waiting for bullish triggers to breakout on the upside.
A mild bearish bias is seen presently after prices failed to follow through higher above MYR 3,200/tonne, which could now take prices lower to 3,005-10 followed by very important support at 2,960-70 levels.
As mentioned earlier, in the medium-term picture, there is scope for this uptrend to turn into a very strong one even targeting 3,200 levels, a potential medium-term target area.
After hitting 3,200 levels, prices have been in a sideways move for more than a month now. The present sideways move has been accompanied by good volumes at the lower end of the range, suggesting a strong up move once it breaks out of the consolidation in the 3,000-3,200 zone. Potential targets are around 3,350-3,450 levels in the near-term.
Only an unexpected decline below 2,960 could lead to a stronger correction. Such a fall could see the next stronger support around 2,810-20 levels, being an important fibonacci retracement level.
As explained before, a one sided move without price corrections could be vulnerable for a sharp decline subsequently.
But, the way prices have been building and volumes rising at the lower end of the range, our favoured view still expects prices to break higher above 3,200 in the coming sessions and aim for the targets 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. 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 revival.
Therefore, look for palm oil futures to test supports and rise subsequently.
Supports are at MYR 3,005, 2,965 and 2,910. Resistances are at MYR 3,090, 3,155 and 3,210.
The writer is the Director of Commtrendz Research.There is risk of loss in trading.
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