Malaysian palm oil futures on the Bursa Malaysia Derivatives exchange ended higher on Friday on short-covering and bargain-hunting with market participants expecting seasonally lower production. Markets are counting on a seasonal decline in output to help ease stocks and support prices, especially after cargo surveyor data on Friday showed firm export demand. Cargo surveyor Intertek Agri Services said shipments during March 1-15 rose 0.2 per cent from a month ago to 675,210 tonnes, while another surveyor SGS (Malaysia) Bhd said exports for the period rose 4.6 per cent to 678,829 tonnes. Palm oil's upside remains limited due to a looming bumper soya crop from South America and US soya export data point to a weak global demand for vegoils.
CPO active May month futures declined as expected. As mentioned earlier, strong resistance will be seen at 2,500-20 Malaysian ringgit (MYR) a tonne levels and it looks unlikely to cross that in the near-term. However, a close above 2,525 MYR/tonne could take prices towards trend line resistance at 2,580-85 MYR/tonne. Since indicators are hinting at weakness, the upside attempts could be resisted strongly again. Resistances will be seen strong at 2,665-75 MYR/tonne levels now. Decline below 2,355 MYR/tonne could see prices testing the important levels near 2,285 MYR/tonne, or even lower to 2,210 MYR/tonne which we do not favour presently. In the coming week, chances exist for a pullback towards 2,465-75 MYR/tonne levels or even higher while support in the 2,355 MYR/tonne holds.
The extended correction to 2,200 MYR/tonne levels materialised in the form of an extended wave “C”. It looks like a possible wave “C” could have ended at 2,220 MYR/tonne now. For the present impulse move once above 2,650 MYR/tonne, potential exists for the impulse rally to extend to 2,755-2,800 MYR/tonne range too. Only an unexpected decline below 2,350 MYR/tonne could force us to abandon our bullish view. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator hinting at weakness. Only a crossover above the zero line again could indicate a bullish reversal.
Therefore, look for palm oil futures to test the resistance levels and decline.
Supports are at MYR, 2,400, 2,355 and 2,285. Resistances are at MYR 2,465, 2,520 and 2,575.
(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 .