Malaysian palm oil futures on Monday fell lower before hitting a one week high in the morning session tracking gains in other edible oils. Concerns that floods on the east coast of Peninsular Malaysia could hit production also supported the market.
CPO active month February futures bounced higher, but still lacks the momentum to follow-through higher.
As cautioned earlier, the momentum is expected to be strong on the sell side that could further push prices below MYR 2,605-10/tonne.
As observed in the previous update, prices hit 2,565, but a rebound could be in the offing anytime and declines from here could be very short-lived, though there are possibilities of further decline to 2,520 levels too. It could strongly rebound from there.
The present down move looks like a corrective decline within a rising trend.
Dips to 2,550 followed by 2,510 are expected to hold support in the coming week.
The favoured view still expects, while prices hold above supports in the broader picture 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 1,850was 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 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 materialising and the impulse wave is under way. 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 2,945-50 while 2,585 holds. The equality target for the present up move lies around 3,120-25 .
RSI is in the neutral zone now indicating that it is neither overbought nor oversold. It is also showing a positive divergence indicating a potential bottom.
The averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal.
Only a crossover again above the zero line could hint at bearishness again.
Therefore, look for palm oil futures to test support levels and then rise in the coming sessions.
Supports are at MYR 2,550, 2,520 and 2,510. Resistances are at MYR 2,645, 2,712 and 2,760.
The writer is the Director of Commtrendz Research, There is risk of loss in trading.