Malaysian crude palm oil (CPO) futures on BMD exchange ended higher on Friday and had a first weekly gain in three, as rising crude oil prices increased the appeal of vegetable oils used in bio fuels. Palm oil fell 8.9 per cent in February, the first drop since June, amid speculation supplies may rebound from Malaysia and Indonesia rains eased. However, due to bargain-hunting and energy prices crossing $100 a barrel, prices have rebounded. And more so in soya complex, which is directly related to crude oil, due to a higher biodiesel mandate for 2011 and 2012 in US and Brazil. Soyabean oil rose higher overnight finding support from a steep rally in crude oil prices, as well as labour disputes at Argentine ports that have threatened soy shipments.
CPO futures rose higher as per expectations. CPO futures are gradually rising now, indicating a possible rally higher again. Prices could stretch to 3,700 Malaysian ringgit (MYR) a tonne levels or even higher to 3,775-85 MYR/tonne where it could find good resistance. Supports will now be seen in the 3,575-85 MYR/tonne range. Subsequently, a decline towards 3,200 MYR/tonne or even lower can be seen. This is still our favoured view. Only a direct rise above 3,853 MYR/tonne could force us to abandon our bearish view and revive bullish hopes to cross 4,000 MYR/tonne once again.
We believe the impulse that began from 1,427 MYR/tonne, which hit 4,486 MYR/tonne ended and a prolonged corrective move has possibly ended at 1,335 MYR/tonne. In the big picture, a new impulse began from 1,335 MYR/tonne and the third wave with a projected objective of 3,900 MYR/tonne has been met. Most probably a wave “A” target has been met. A corrective wave “B” targeting 3,625-3,700 MYR/tonne can be seen now. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator indicating a bearish reversal. Only a cross-over above the zero line again could indicate a reversal in trend. Therefore, look for palm oil futures to test the resistance levels initially and then fall lower again.
Supports are at MYR 3,625, 3,575 and 3,465. Resistances are at MYR 3,700, 3,775 and 3,853.
(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)