Malaysian palm oil futures on Bursa Malaysia Derivatives Exchange ended higher on Friday, helped by the ringgit’s weakness and expectations of lower stocks on the back of rising exports.

Exports of Malaysian palm oil products fell more than 3 per cent in May compared with a month ago, cargo surveyor data showed, as shipments to Europe and China slowed. Palm oil is on track to notch its first monthly gain since January, with a near 4 per cent rise that was underpinned by hopes of a cut in stocks due to near-stagnant production levels and increased buying. CPO active month futures are moving perfectly in line with our expectations.

As mentioned in the earlier update we need to wait and watch the 2370-2395 Malaysian ringgit (MYR) a tonne levels closely to see if there is a change in the overall bearish picture prevailing presently.

With indicators turning friendly and prices sustaining in the 2365-2400 MYR/t zone, it looks likely that the up move could extend towards 2450-65 MYR/t levels, also being a fibonnaci retracement level as seen in the chart. We can expect strong resistance in the 2450-65 MYR/t zone now. Supports are now at 2345-50 MYR/t followed by 2325-30 MYR/t levels now. However, once, 2,3000 MYR/t gives way, then we could get into more weakness targeting 2095 MYR/t levels. In the coming week we expect prices to edge higher and find strong resistance at above-mentioned levels. Only a daily close above 2485 MYR/t could turn the picture neutral to bullish again.

The wave counts still remains mixed and prefer for the time being to go with possibility of an end of wave “C” at 2220 MYR/t now. A decline below 2,300 MYR/t has dashed all bullish hopes. Ideally, prices could come down towards 2,000 MYR/t or even lower in the bigger picture as an extension of wave “C”. There is also a possibility that 2,220 MYR/t has ended with an intermediate bottom. This mean an new impulse could end somewhere near 2450 MYR/t and the impulse could continue higher while 2270 MYR/t remains undisturbed. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal. Only a crossover below the zero line again could indicate a bearish trend.

Therefore, look for palm oil futures to test the resistances levels.

Supports are at MYR, 2365, 2345 and 2300 Resistances are at MYR 2425, 2465 and 2500.

(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.t@gmail.com. )

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