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Malaysian palm oil futures ended moderately higher on Friday ahead of a long weekend and news of drought in India again renewed buying interest. The market will be closed on Monday for a holiday. Palm oil producers Indonesia and Malaysia will benefit from any shortfall in India’s soya output. Markets expect India’s soyabean output to drop 18-20 per cent in the new season because of deficit monsoon. Lower production in Malaysia itself could underpin prices. Mala ysia produced 9.4 million tonnes of palm oil in the first seven months of this year, down from 9.8 million tonnes in the same period a year ago.

CPO futures have been consolidating in a range, which is very typical before any move begins. A break above 2,402-05 Malaysian ringgit (MYR) a tonne could take prices higher towards the near-term resistance point at 2,465-75 MYR/tonne zone being a trend line resistance point. Possibility now exists for even a test of 2,545 MYR/tonne while above 2,315 MYR/tonne. Though we haven’t abandoned our overall bearish view on palm, there are indications of bullishness creeping into the market. Therefore, it is important to watch supports at 2,315 MYR/tonne. A direct rise above 2,500 MYR/tonne could force us to abandon our bearish view.

A new impulse began from 1,427 MYR/tonne and this could be the third wave, which has a possibility to peak at 4,486 MYR/tonne. A prolonged corrective fourth wave in the form of A-B-C is in progress now. A possible wave “C” could have begun with possible targets extending even lower towards 1,200 MYR/tonne. This could be negated on a rise above 2,500 MYR/tonne and a fresh review of the wave counts. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator indicating bullish reversal. Only a crossover below could once again indicate bearishness. Therefore, look for palm oil futures to test the resistance levels.

Supports are at MYR 2,335, 2,310 and 2,245. Resistances are at MYR 2,425, 2,475 and 2,525.

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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