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Malaysian palm oil futures ended lower on Friday on fears of weak demand and rising production. With the monsoon situation improving in India, CPO futures slid further easing somewhat during the closing mostly on short-covering ahead of the weekend. Energy prices also fell sharply owing to rising stocks and weak demand. With production in both Malaysia and rival Indonesia picking up, and demand from main buyers like India and Pakistan weak, more pressure is expected on pri ces.

CPO Active September futures fell lower in line with expectations. As expected, we saw a fall below 2,200 Malaysian ringgit a tonne (MYR/tonne). Major support is at 2,058 MYR/tonne now, being a crucial support point as seen in the chart above. Only a rally above 2,350 MYR/tonne could hint at bullishness ahead, also a trendline resistance level in the near-term. And such a pullback can have major resistance in the 2,500 MYR/tonne zone again. Sustained bullishness can only be seen on daily close above 2,547 MYR/tonne. Favoured view expects resistances to cap for a test of important support at 2,058 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 materialize on a daily close below 2,050 MYR/tonne. RSI is in the oversold zone now, indicating a possible correction in the offing. The averages in MACD have gone below the zero line of the indicator indicating a bearish reversal. Only a crossover above could once again begin a bullish trend. Therefore, look for palm oil futures to test the support levels and rise higher from there.

Supports are at MYR 2,105, 2,057 and 1,978. Resistances are at MYR 2,275, 2,350 and 2,425.

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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