The Hindu Business Line : Palm oil may test resistance, dip

Malaysian palm oil futures rebounded higher on Friday as supply fears resurfaced. Despite the rebound, the benchmark price closed down 5.4 per cent this week, its biggest weekly loss since the end of February. Palm has struggled to hold onto gains after rising more than 50 per cent this year.

Malaysian palm exports for May 1-20 have ranged between 7,45,000 to 7,55,000 tonnes, cargo surveyor data showed, which is some 20 to 30 per cent lower than normal. Palm oil stocks in the world’s second largest producer of the vegetable oil have been sliding 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 August futures fell lower in line with our expectations. Breach of important near-term support at 2,620 Malaysian ringgit a tonne (MYR/tonne) triggered a corrective fall due for some time now. Resistances are at 2,700 MYR/tonne levels now. Unexpected rise above 2,700 MYR/tonne could hint at resumption of bullishness. Direct fall below 2,524 MYR/tonne could take prices lower towards 2,360 MYR/tonne. Ideally, a base for the next move up could be built in the 2,300 MYR/tonne zone. 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 neutral zone now, indicating that it is neither overbought nor oversold. 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 2,495, 2,353 and 2,251. Resistances are at MYR 2,625, 2708 and 2,762.

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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