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Malaysian palm oil futures on BMD exchange ended higher Friday after hitting three-year lows as worries persisted over record high stocks. Despite further stimulus coming from the Federal Reserve, prices have been sluggish due to the pressure of high stocks, as worries about the impact of a possible U.S. fiscal crisis capped price gains. Markets will be looking out for Malaysia's export data for the first half of December, hoping for a stronger export demand after cargo surveyor Intertek Testing Services reported a 2.8 percent slide in shipments for the Dec. 1-10 period. Markets also waiting for Malaysia's new January crude palm oil export tax set to be announced on Monday, which could boost export demand and help bring stocks down.
CPO active Feb month futures pulled back higher as expected. 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. Prices are expected to rise towards next resistance at 2480-85 MYR/ton on the March contract. A daily close above this level will confirm a triple bottom formation, a very bullish sign. Favoured view expects that while supports in the 2215-45 MYR/ton zone holds, we can expect prices to grind higher towards resistances at 2485 MYR/ton followed by 2615-20 MYR/ton. Unexpected decline below 2210 MYR/ton could hint at weakness again.
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, 2245, 2200 & 2150 Resistances are at MYR 2420, 2485 & 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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