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Malaysian palm oil futures ended sharply lower as much as 4.1 per cent on Friday triggered by stop loss selling. Bearishness continued to grip the market on the back of rising production and waning exports. New leads would only emerge after cargo surveyors release Malaysian October 1-10 palm oil exports next week. Expectation that Asia should start restocking again after mid-October, which is the end of the festival season, is the only bullish factor going forward. The ear thquake in Indonesia did not affect the palm growing areas and therefore, any bullish hopes were dashed forcing market participants to exit their longs in line with a bearish medium-term price outlook made by Mr Dorab Mistry at an edible oil conference in Mumbai.

CPO futures tanked lower in line with our overall bearish view. As cautioned in the previous update, a daily/weekly close below 2,120 Malaysian ringgit (MYR/) a tonne damaged any bullish prospects for CPO. Fall below 2,095 MYR/tonne also being a trend line support point gave way indicating further weakness ahead. Only a rally above 2,125 MYR/tonne could restore bullish hopes again. Immediate support is at 1,970 MYR/tonne followed by a potential target at 1,835 MYR/tonne. While below 2,125 MYR/tonne we favour rallies to get capped for a test of the above mentioned targets.

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

Supports are at MYR 1,995, 1,962 and 1840. Resistances are at MYR 2,095, 2,125 and 2,210.

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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