Commodity Calls

Corrective dip likely in palm oil

Yoganand D BL Research Bureau | Updated on February 22, 2021 Published on February 22, 2021

The Crude Palm Oil (CPO) continuous futures contract on the Multi Commodity Exchange of India (MCX) has advanced 0.8 per cent on Monday and trades at around ₹1,049 per 10 kg.

Since the contract took support at around ₹570 in early May 2020, it has been on an intermediate-term uptrend forming higher peaks and higher troughs.

While trending up, the contract surpassed a key resistance at ₹835 in early November 2020 and continued to trend upwards. The contract found support at ₹900 in this January and resumed its uptrend after a near-term corrective decline.

It has been in a short-term uptrend since then. Recently, the contract surpassed the psychological resistance level of ₹1,000 and extended the upmove.

As long as the contract trades above the key base level of ₹1,000 it will remain positive.

However, with the decline in daily volume over the past two weeks and the weekly relative strength index showing signs of negative divergence a near-term corrective decline could be on the cards.

Traders should tread with caution in the near term. A fall below ₹1,000 can pull the contract down to ₹949 and then to ₹900 over the short-term. But an upward bounce from ₹1,000 can keep the contract moving sideways for some time.

A strong rally above ₹1,060 can take the contract higher to ₹1,075 or ₹1,080 levels.

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Published on February 22, 2021
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