Commodity Calls

Palm oil futures will test support, rise

Gnanasekaar T | Updated on January 08, 2018 Published on October 02, 2017

Malaysian palm oil futures ended lower tracking weakness in soya oil on the Chicago Board of Trade (CBOT) that fell for a fourth consecutive session , weighed down by weaker expectations of rising stockpiles. Production in September are expected to rise in line with seasonal trend dampening sentiment further.

CPO active month December futures are moving on expected lines. As we mentioned earlier, one of our targets was almost met at MYR 2,905/tonne levels, a crucial fibonacci retracement level. The decline from there has been sharp and quick. Scope for further downside exist, as no clear signs of support and reversal is noticed.

However, we still expect prices to edge higher towards 2,905 or even higher, with chances of further extending to 3,045/50 levels, as the big picture still hold hope for prices to push higher again.

But, as cautioned in the previous update, fall below MYR 2,685/tonne has arrested the bullishness temporarily. Such a fall could once again see strong supports emerge in the 2,650-60 zone.

Failure to hold here could see prices edging lower towards next important support around 2,605-10 levels from where it could bounce higher again. But, despite expectations of a further decline, the bullish trend still remains intact. The present down move from the recent highs looks like a corrective decline within a rising trend. The bigger picture continues to display bullish tendencies and we still expect prices to eventually rise higher towards resistances mentioned above.

While prices hold above 2,605-10 range it could eventually inch higher towards targets mentioned above in the coming sessions.

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.

As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,425 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.

The medium- to long-term expectation, that we have been having is slowly materialising and the impulse wave is under way. But, a short-term fall below MYR 2,800 levels now has caused doubts on our overall bullish expectations. The present up move from 2,425 levels looks impulsive with potential targets around 2,795-2,800, while 2,585 holds.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator hinting at a bullishness to be intact. Only a crossover again below the zero line could hint at bearishness again.

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

Supports are at MYR 2,645, 2,610 & 2,575. Resistances are at MYR 2,725, 2,760 & 2,800.

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

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Published on October 02, 2017
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