Malaysian palm oil futures on the Bursa Malaysia Derivatives ended higher on Monday, supported by tight physical supplies for August and the market tracked firmer rival vegetable oils on the Chicago and Dalian.

CPO active month October futures are moving in line with our expectations. As mentioned earlier a there is no confirmation of an uptrend yet, but some positive signs are emerging. After a sharp decline that continued from MYR 2,677/tonne levels and ended at 2,186 levels, the present move looks like a possible retracement with targets now stretching to 2,490-95 levels, which also happens to be fibonacci retracement level. Nearer supports are now at 2,400 followed by 2,370 levels.

Failure to hold supports here could hint at further weakness ahead. In the bigger picture, fall below 2,240 could aim for 2,088-90 levels on the downside before finding good support from there. However, the present rally has scope to push higher towards 2,495-2,500 levels, or even higher towards 2,545-50 levels being a falling trend line resistance level.

A direct rise above 2,455 on a closing basis could hint at resumption of the uptrend, which could potentially stretch to test 2,500-50 levels, or even higher in the coming sessions. Only an unexpected decline below 2,303 could once again revive bearish hopes for 2,088 .

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 2,200 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 are still 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 consolidate and rise again.

Supports are at MYR 2,400, 2,370 and 2,305. Resistances are at MYR 2,455, 2,495 and 2,545.

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

Related Topics
comment COMMENT NOW