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Malaysian palm oil futures ended flat on Friday as the markets were trading cautious ahead of a key data on stocks due out on Monday. The strong run early this week was underpinned by hopes that palm stock in Malaysia may fall further to below 1.3 million tonnes in April which, coupled with low soyabean yields in Argentina, raised fears of tight global vegetable oil supplies. Palm oil stocks in the world’s second largest producer of the vegetable oil have been slidin g for the past few months on a combination of an aggressive replanting scheme and weaker production due to strong rains and biological tree stress.

CPO Active July futures are moving higher in line with our expectations. As mentioned in the previous update we expected a test of potential targets in the range of 2,730/55 (Malaysian ringgit/tonne) MYR/tonne or even higher towards 2,910 MYR/tonne. We continue to favour a test of 2,900 MYR/tonne levels, as long as 2,605 MYR/tonne remains well supported. Important near-term support is at 2,655 MYR/tonne followed by 2,620 MYR/tonne. Favoured view expects resistances to be tested as long as important support at 2,600 MYR/tonne holds. Unexpected fall below 2,590 MYR/tonne could dash our bullish hopes and result in a correction lower towards 2,524 MYR/tonne or even lower towards 2360 MYR/tonne. A new impulse began from 1,427 MYR/tonne and this could be the third wave, which has at 4,486 MYR/tonne. A prolonged corrective fourth wave in the form of A-B-C is in progress now. Subsequently, wave “C” could begin with possible targets extending even lower towards 1,200 MYR/tonne. This could materialise on a daily close below 2,050 MYR/tonne. RSI is in the highly overbought zone now, indicating that a downside correction is due in the coming sessions. The averages in MACD are above the zero line of the indicator indicating bullishness. A crossover below could once again begin a bearish trend. Therefore, look for palm oil futures to test the resistance levels and then correct lower.

Supports are at MYR 2,655, 2,605 and 2,525. Resistances are at MYR 2,730, 2820 and 2909.

Gnanasekaar .T

(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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