The Hindu Business Line : Palm oil futures may head lower

MALAYSIAN crude palm oil futures on MDEX closed slightly firm on Friday with thin volumes noted ahead of the Easter holiday. CBOT and the European markets are closed till Monday.

In India, edible oil supplies could be hit with several thousand tonnes of oil held up at the ports as a truckers' strike continue with the deadlock between the truckers and the Government extending further.

End-April stocks could stay at the psychological level of one million tonnes instead of 960,000-970,000 tonnes as predicted by influential private forecaster Mr Ivan Wong because of poor exports.

April output was also seen at one million tonnes against the official 984,892 tonnes in March. Cargo surveyor SGS had estimated Malaysia's April 1-15 palm oil exports at 480,769 tonnes against 514,637 tonnes in March 1-15. Despite the decline in exports, the SGS data showed renewed buying interest from consumers at Red Sea Ports.

The active contract moved lower as per expectations. Fall from 1495 Malaysian ringgit/tonne, a fibonacci 38.2 retracement level continues to head lower and crucial support at 1378 MYR/tonne has also been broken. However, the fall below that level has not been very convincing and prices continue to linger very close to it.

A move higher above this long term trend line point can see prices testing the 1420 MYR/tonne levels again. With the underlying trend still bearish any rise could only be a good excuse for position adjustment and therefore should be considered corrective in nature. With a fall seen from 1495 MYR/tonne, revisits into the wave counts have revealed that we are in the last leg of wave "A" still, and a break of 1378 MYR/tonne has confirmed this. RSI is in the neutral zone indicating that it is neither overbought nor over sold. The average in MACD however continues to be below the zero line in the indicator showing weakness.

A clear change in trend will be noticed after the averages in MACD go above the zero line in the indicator. Current prices are well below the short term 9 day EMA at 1399 MYR/tonne and the 25day EMA is now at 1435 MYR/tonne.

Look for prices to head lower after a minor upward correction. Resistance at 1380, 1420 & 1435 ringgits. Supports at 1360, 1330 & 1302 ringgits.

The author is a trader with Scotiabank and the views expressed by him are his own and not necessarily of his employer. This analysis is based on historical price movements and there is risk of loss on trading.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Palm oil futures may head lower

Poor monsoon may affect gold demand