Malaysian Palm oil future s technical analysis outlook for the week ended 030114

Malaysian palm oil futures on BMD ended lower Friday, on fears of higher output fears of benign demand weighing on prices. Output in Indonesia and Malaysia was seen rising while exports were barely picking up. Exports of Malaysian palm oil products for December fell 3.3 percent to 1,423,644 tonnes from 1,472,694 tonnes shipped during November, cargo surveyor Societe Generale de Surveillance said on Tuesday. Warnings of floods over a palm-growing region pushed up palm prices this week, however demand worries capped gains. Further depressing the edible oil complex was the sharp decline in energy prices.

CPO active month futures are moving in a broad range with a bearish bias. As mentioned in the previous update, prices crossed important resistance levels in fairly thin volumes indicating the upward break to be a suspect. Immediate support is at 2620 MYR/ton followed by 2585 MYR/ton levels. Important support is at 2545 MYR/ton for CPO futures and we expect this level to hold for a recovery back towards 2670-85 MYR/ton levels or even higher towards 2745 MYR/ton levels. This is our favoured view. Only a fall and close below 2535 MYR/ton could dash our expectations of an upward bounce from above mentioned supports.

As mentioned earlier prices met an intermediate wave target at 2135 MYR/ton and corrective decline to 2345-50 MYR/ton levels, followed by a sharp third wave move to 2575-2600 MYR/ton materialised. The potential third wave targets are near 2750-2800 MYR/ton levels now. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The negative divergence identified earlier has worked and strong corrective fall was seen. The averages in MACD are still above the zero line of the indicator hinting at bullishness to be intact. Only a crossover below the zero line again could again hint at weakness again.

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

Supports are at MYR, 2620, 2585, 2545 Resistances are at MYR 2670,2700 & 2745..

(The author is the Director of Commtrendz Research and also in the advisory panel of Commodity exchanges and corporate houses. The views expressed in this column are his own. 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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