Commodity Calls

Palm oil will test support levels, rise

Gnanasekaar T | Updated on January 09, 2018 Published on November 27, 2017

BL29-PALM

Malaysian palm oil futures on Monday fell to a four-month low tracking softer edible oils on the Chicago Board of Trade and China’s Dalian Commodity Exchange.

CPO active month February futures are correcting lower as expected. As mentioned earlier, the charts are not looking so friendly in the short-term.

As cautioned earlier, a fall and close below MYR 2,670/tonne could hint at weakness again targeting 2,610-15, from where it could once start a fresh up move. We also expected supports the momentum to be strong on the sell side that could further push below 2,605-10 also.

On an intra-day basis prices hit 2,565, but a rebound could be in the offing anytime and declines from here could be very short-lived, though there are possibilities of further decline to 2,520 too. It could strongly rebound from there.

As illustrated earlier, despite the corrective declines from time to time, the bullish trend still remains intact.

The present down move from the recent highs looks like a corrective decline within a rising trend. Dips to 2,550 followed by 2,510are expected to hold support in the coming week.

The favoured view still expects while prices hold above supports in the broader picture, it could eventually inch higher towards targets mentioned above in the coming sessions.

A possible new impulse looks to have started again. One of our targets at 1,850was met.

The rally from there looks very impressive. As mentioned earlier, we expected prices to edge higher towards 2,645 initially and then correct lower to 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.

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 .

RSI is in the neutral zone now indicating that it is neither overbought nor oversold.

The averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal. Only a crossover again above the zero line could hint at bearishness again.

Therefore, look for palm oil futures to test support levels and then rise in the coming sessions. Supports are at MYR 2,550, 2,520 and 2,510. Resistances are at MYR 2,645, 2,712 and 2,760.

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

Published on November 27, 2017
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