Malaysian palm-oil futures on Monday ended lower weighed down by expectations that production in August would rise slightly and by a stronger ringgit.

CPO active month November futures moved as expected. As we have been maintaining, it looks like the short- to medium-term has turned bearish – the bigger picture still favours bullishness ahead. The big picture still indicates neutral tendencies and a chance of a revival in bullish trend from critical support points. Potential targets are still near 2,815-2,840 MYR/tonne levels now, with chances of further extending to 2,905 , a crucial fibonacci retracement level eventually. As expected, we saw prices testing 2,782 , but a corrective decline looks likely towards 2,710-15, and failure to hold here could see prices edging lower to 2,675-80 from where we expect a revival again. The bigger picture continues to display bullish tendencies, and though the near-term momentum might be waning, we expect prices to eventually rise higher towards resistances mentioned above. Only a direct fall below 2,665 could dent our bullish expectations and temporarily delay the upside expectations. Such a fall could once again see strong supports emerge in the 2,595-2,600. Favoured view still expects prices to find supports and inch higher again in the coming sessions.

We will now reassess the wave counts, as prices have crossed over above 2,370-2,400. A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive. As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,425 or even lower to 2,225, then subsequently rise towards a medium- to long-term target at 3,600 , which could bring this current impulse to an end. The medium- to long-term expectation that we have been having is slowly materialising and the impulse wave is underway. But a short-term fall below 2,800 now has caused doubts on our overall bullish expectations. The present up move from 2,425 looks impulsive with potential targets around 2,795-2,800 while 2,585 holds. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. Positive divergences in indicators hint at a bullish reversal ahead. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal. Only a crossover again below the zero line could hint at bearishness again.

Therefore, look for palm oil futures to test the support levels and then rise higher again.

Supports are at MYR 2,715, 2,680 & 2,620. Resistances are at MYR 2,785, 2,820 & 2,850.

The writer is the Director of Commtrendz Research. There is risk of loss in trading.

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