Malaysian palm oil futures on Bursa Malaysia Derivatives exchange ended lower on Friday, posting a fourth straight weekly loss, as market participants remained cautious in a volatile week that saw a broad sell-off across commodities. Weak economic data from the US and China raised concerns that slowing global growth could hurt demand, triggering a flight of capital this week from markets such as crude oil and gold. Palm oil has also come under pressure after Malaysia's exports of the edible oil fell for the first 15 days in the month. Palm oil shipments from Malaysia, the world's second-largest producer, fell 4 per cent and 7.2 per cent according to cargo surveyors Intertek Testing Services and Societe Generale de Surveillance, respectively. Inventory fell to 2.17 million tonnes in March and could fall below the psychological 2-million-tonne mark this month if exports stay firm.

CPO active July month futures are moving in line with our expectations. As mentioned earlier, a bearish bias is seen in the coming weeks. Direct fall below 2,330 Malaysian ringgit (MYR) a tonne triggered a decline to 2,265 MYR/tonne. Price structures hint at some support in the 2,245-65 MYR/tonne levels. A mild recovery to 2,345-55 MYR/tonne is possible in the coming week. The recovery could extend even towards 2,400-2,415 MYR/tonne. However, CPO futures are still in a broad downtrend and any recoveries and rallies could be short-lived and possibly base out in the 2,200-2,210 MYR/tonne levels now. Only an unexpected move above 2,425-30 MYR/tonne could postpone the bearishness temporarily.

The wave counts still remains mixed and prefer for the time being prefer to go with possibility of an end of wave “C” 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 2,300 MYR/tonne could force us to abandon our bullish view. Such a decline could open the downside for 1,900 MYR/tonne. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still 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 resistances and then decline again.

Supports are at MYR 2,265, 2,245 and 2,210. Resistances are at MYR 2,325, 2,360 and 2,430.

(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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