Commodity Calls

Palm oil futures will test supports, rise

Gnanasekaar T | Updated on January 15, 2018 Published on January 15, 2018

Malaysian palm oil futures ended higher on Monday, but hit a two-week low on the back of a stronger ringgit. A stronger ringgit typically makes physical prices more expensive for overseas buyers and has a bearing on end stocks. Exports of Malaysian palm oil products for January 1-15 fell 2.8 per cent to 564,968 tonnes compared with the same period last month, cargo surveyor Societe Generale de Surveillance said.

CPO active month April futures are moving in line with our expectations. The upward retracement from MYR 2,420/tonne is making us believe a possible intermediate bottom is in place. A close above 2,560, a previous support that was broken when prices went to MYR 2,420, has further instilled bullish hopes. Today’s price action of a fall below 2,550 has altered the bullish picture mildly. But taking support around 2,520 and a close above 2,550 subsequently, has kept the direction intact for a test of 2,725.

The 2,695-2,725 zone — a gap that was created earlier could potentially get filled. Dips to 2,520 followed by 2,485 levels is expected to hold supports in the coming week. The favoured view still expects while prices hold above supports in the broader picture, it could eventually inch higher.

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. We expected prices to push higher towards 2,645 initially and then correct lower towards 2,425 or even lower to 2,225 and then subsequently rise towards a medium- to long-term target at 3,600.

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 looks impulsive with potential targets around 2,945-50, while 2,585 holds. The equality target for the present up move lies around MYR 3,120-25.

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

Therefore, look for palm oil futures to test the support levels in the coming sessions.

Supports are at MYR 2,520, 2,485 and 2,445. Resistances are at MYR 2,565, 2,620 and 2,710.

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

Published on January 15, 2018
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