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Malaysian palm oil futures ended lower on Friday as prospects of higher global vegetable oil supplies as well as uncertain financial markets pressured prices lower. Weaker US soya oil on account of favourable weather leading to a record US soya crop has weighed on palm oil. Demand and supply has been giving confusing signs with exports still expected to be good and stocks to be tight, but markets could be moving with a bearish bias in line with the energy markets and rival soya oil. Cargo surveyors reported 1.3 million tonnes of exports in August, while stocks were expected to fall further from month ago levels.

CPO futures fell sharply lower in line with our overall expectations. Once the crucial support at 2,315 Malaysian ringgit (MYR) a tonne tonne gave way, the fall continued. The fall could now stretch lower towards 2,095-2,100 MYR/tonne. Ideally, a bounce can be expected from there, however, failure to do so could have bearish implications. Further fall towards 2,045 MYR/tonne cannot be ruled out. A head and shoulder pattern is also in the making which is a bearish pattern. Only a rise above 2,300-15 MYR/tonne can revive bullish hopes again.

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. 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 are above the zero line of the indicator indicating bullishness. A cross over below could indicate a bearish reversal again. Therefore, look for palm oil futures to test the support levels.

Supports are at MYR 2,145, 2,095 and 2,045. Resistances are at MYR 2,265, 2,315 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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