Commodity Calls

Palm oil futures will test supports, rise

Gnanasekaar T | Updated on January 22, 2018 Published on January 22, 2018

Malaysian palm oil futures ended higher on Monday with a more than 1 per cent gain. on Monday evening, rising on the back of bullish sentiment at an industry conference held in Karachi this week. Prices are expected to trade at 2,500-2,700 ringgit ($635-686) a tonne due to falling production from March onwards, and as stock levels decline from now until July, said leading vegetable oils analyst Dorab Mistry on Saturday.

CPO active month April are yo-yoing with a bearish bias, but positive indications are emerging though it is uncertain to confirm it just yet. A bounce from MYR 2,433 per tonne has revived bullish hopes. A retracement to 2,550 looks likely now with intermediate resistance at 2,510-15 . A close above here in good volumes can hint at further upside to 2,550 followed by 2,640-45 in the coming sessions.

As illustrated earlier, despite the corrective declines from time to time, the bigger picture bullish trend still remains intact. Though, it looks like a head and shoulder has been confirmed, such a pattern coming after a recent double bottom has more chances to fail, which is why we are still holding on to a medium-term bullish outlook. Either prices could first dips to 2,420-25 followed by 2,360-70 and then retrace higher, or, a direct rise above 2,520 could see a retracement higher immediately.

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 1,850 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 2,800 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 3,120-25 . But a fall below 2,530 has changed the counts and we will review it in the next update.

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 and rise . Supports are at MYR 2,445, 2,420 and 2,370. Resistances are at MYR 2,520, 2,555 and 2,645.

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

Published on January 22, 2018
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