Malaysian palm oil futures ended lower tracking weakness in soya oil on the Chicago Board of Trade (CBOT) and as demand from top consumers China and India waned. The benchmark contract posted its biggest intraday percentage drop in one week, and was headed for a second straight session of decline.

CPO active month December futures are moving on expected lines. As we have been maintaining, the big picture still indicates neutral to bullish tendencies and a chance of a strong revival in bullish trend. One of our targets was almost met at MYR 2,905/tonne levels — a crucial fibonacci retracement level. We still expect prices to edge higher towards 2,905 or even higher, with chances of further extending to MYR 3,045/50 levels.

But, as cautioned in the previous update, we expected prices to test supports around 2,740 levels, which happens to be a critical support, which might hold attempts to decline. Fall below 2,685 has arrested the bullishness temporarily. Such a fall could once again see strong supports emerge in the 2,660 zone. But, despite expectations of a further decline, the bullish trend still remains intact. The present slide from the recent highs looks like a corrective decline within a rising trend. The bigger picture continues to display bullish tendencies and we still expect prices to eventually rise higher towards resistances mentioned above. Favoured view still expects, while prices hold above MYR 2,650-60/tonne range and it could eventually inch higher towards targets mentioned above in the coming sessions.

Wave counts: 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 and 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 materializing and the impulse wave is under way. But, a short-term fall below MYR 2,800/tonne levels now has caused doubts on our overall bullish expectations. The present up move from 2,425 levels 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. The averages in MACD are above the zero line of the indicator hinting at a bullishness to be intact. 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 rise in the coming sessions.

Supports are at MYR 2,660, 2,615 & 2,575. Resistances are at MYR 2,725, 2,760 & 2,800.

The author is the Director of Commtrendz Research and there is risk of loss in trading.

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