Malaysian palm oil futures on Bursa Malaysia Derivatives exchange ended near 5-month low on Friday, posting a weekly loss of 2.7 per cent, with many investors exiting the market as the country heads into polls.

Malaysia, the world's No.2 palm oil producer, holds general elections on Sunday. Market participants avoided taking risks as they waited for further trading clues from official data on palm stocks and output levels due next week. Cargo surveyor data on Tuesday showed April's palm oil exports fell between 4.3 per cent and 5.6 percent on the month, on waning Chinese demand, stoking concern that prices could tumble further. However, at lower levels bargain hunting interest is noticed in anticipation of festive buying interest. Buying may pick up later this month ahead of the fasting month that starts in July, which could help to clear palm oil stockpiles in top exporters Indonesia and Malaysia

CPO active July month futures are moving in line with our expectations. As mentioned in the earlier update, our favoured view expected decline to 2,245 Malaysian ringgit (MYR) a tonne levels. Prices could retest the 2,210/2,220 MYR/t levels before seeing a strong pullback towards 2345/65 MYR/t levels again in the coming sessions. However, once 2,200 MYR/t gives way, then we could get into more weakness targeting 2,095 MYR/t levels, which we do not favour presently. The 2,200 MYR/t support has been holding from the year 2010 onwards. The earlier support at 2,330-45 MYR/t has now turned into a strong resistance level and we expect prices getting capped here on any recovery. Only a daily close above 2,365 MYR/t could revive hopes of a possible recovery to 2,400 MYR/t levels or even higher. However, prices are expected to decline lower once again and a sustained upward momentum still looks unlikely.

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/t now. For the present impulse move once above 2650 MYR/t, potential exists for the impulse rally to extend to 2755-2800 MYR/t range too. 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. 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.

Supports are at MYR 2245, 2210 and 2130 Resistances are at MYR 2300, 2345 and 2400.

(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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