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Malaysian palm oil futures on BMD exchange ended sharply higher Friday posting their first weekly gain in five weeks on short-covering amid optimism for a zero export tax on crude palm oil in early 2013 to cut stocks. Export tax for January at zero percent, could see Malaysia grab more market share from top producer Indonesia with expectations that even February taxes could remain at zero. A small surprise increase in Malaysia's palm exports for the first 20 days of the month also injected cheer in the market, with cargo surveyor Societe Generale de Surveillance reporting a slight increase of 0.5 percent in shipments for the period from a month ago. Seasonally slowing production towards the year end could also give additional support to Malaysia's palm oil prices in the coming months.
CHART
CPO active March month futures are moving as per expectations. As mentioned in the earlier update, prices could ease towards supports at 2215 MYR/ton in the near-term and then grind higher from there. As we have been maintaining, the big picture price structures are still favourable for a push higher towards 2600 MYR/ton. Immediate resistance for March futures is at 2450-55 MYR/ton levels followed by 2625 MYR/ton. Ideally, prices could find support in 2350-65 MYR/to zone and gradually start rising higher again. Failure to hold support here could dash our bullish hopes and such a fall could take prices to crucial support at 2300 MYR/ton or even lower, which we do not favour.
The extended correction to 2,200 MYR/ton levels materialised in the form of an extended wave “C”. It looks like a possible wave “C” could have ended at 2220 MYR/ton now. Once above 2625 MYR/ton, potential exists for the impulse rally to extend to 2755-2800 MYR/ton range. Only an unexpected decline below 2,200 MYR/ton 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 are still below the zero line of the indicator hinting at bearishness to be intact.
Therefore, look for palm oil futures to consolidate and then rise higher.
Supports are at MYR, 2385, 2325 & 2265 Resistances are at MYR 2460, 2525 & 2620.
(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.
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