Malaysian palm oil futures, dropped on Monday as caution over rising stockpiles outweighed positive September export numbers. Exports of Malaysian palm oil products for September were up 51.6 per cent from August, cargo surveyor Intertek Testing Services said on Friday, while data from independent inspection company AmSpec Agri Malaysia showed the exports rose by 49.2 per cent.
The benchmark third month December-contract moved as expected. As cautioned, it needs to be seen if prices can sustain and push higher above important resistances. Prices broke the previous double bottom support at 2140 MYR/tonne, but managed to hold on to hose levels again bouncing from 2137 MYR/tonne levels.
Break below here could open the downside for 2110-15 MYR/ton levels where a long-term rising trend support kicks in. The bigger picture price structure does not yet confirm a bottom in place. But, a close above 2300 MYR/tonne levels could reinforce bullish expectations and alter the bearish picture. We are still of the view that the underlying bigger trend continuing to be bearish, any upticks or unexpected rallies higher could be short-lived and prices could decline subsequently.We need to see clear evidence of a bullish reversal accompanied by volumes.
Though, volumes have been encouraging, but still nowhere near the August 2015 bottom when prices hit 1865 MYR/tonne levels. For now, we favour resistance to kick-in around 2210-40 MYR/tonne and cap upside attempts. The existing broad consolidation could continue between 2110-2240 MYR/tonne in the coming sessions. As per the price structure, a break below 2110 MYR/tonne seems possible with potential targets around 1870 MYR/tonne levels on the downside. But, it is not our favoured view. Only a daily close 2300 MYR/tonne levels could alter the big picture view that was gradually changing to bullish after the double bottom formation around 2140 MYR/tonne levels.
Wave counts
We will now reassess the wave counts, as prices have crossed over above 2370-2400 MYR/tonne. A possible new impulse looks to have started again. One of our targets at 1850 MYR/tonne was met. The rally looks very impressive. We expected price to push higher towards 2645 MYR/tonne initially and then correct lower in a corrective pattern towards 2,100 MYR/tonne, and then subsequently rise towards a medium to long-term target at 3600 MYR/tonne, which could bring this current impulse to an end. The medium to long-term bullish expectations have been dented on a fall below 2655 MYR/tonne levels. This makes us believe that the highs at 3105 MYR/tonne was an end off an impulse and the targets are near 2,100 MYR/tonne levels or even lower where the equality target is expected to be tested. Only a close above 2350 MYR/ton levels could alter the wave counts again, which is not our favoured scenario now. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at bearish to be intact. Only a crossover again above the zero line could hint at a bullish reversal.
Therefore, look for palm oil futures to test support levels.
Supports are at MYR, 2137, 2110 & , 2000 Resistances are at MYR 2195, 2240 & 2300.
The author is the Director of Commtrendz Research and there is risk of loss in trading