The Hindu Business Line : Palm oil may test support levels

Malaysian palm oil futures ended steady on Friday, as the markets probed into supply/demand numbers for future clues. Support is seen from a supply squeeze in vegetable oils presently, but the demand scenario looks pretty weak as demand from major consumers India and China was lacklustre in nature. On Thursday, the market got a boost when Malaysian palm industry data showed stocks eased from record levels. But disappointing Malaysian palm oil exports, which dropped as much as 41 per cent for April 1-10, have depressed the market. Malaysia’s crude palm oil output rose 5.5 per cent to 1,295,643 tonnes in March, from a revised 1,227,969 tonnes in February, official crop agency Malaysian Palm Oil Board said on Thursday.

CPO active contract is moving in line with our expectations so far. As expected, strong resistance was seen at 3495-3510 Malaysian ringgit (MYR) tonne levels. Dips to 3310 or 3275 MYR/tonne is expected to find good support now. Fall below 3273 MYR/tonne could take prices further lower towards 3225 MYR/tonne levels. We believe either a consolidation in the 3200 to 3400 MYR/tonne is possible now, before we see a breakout higher. As mentioned in the previous update, recovery from the long-term support point at 3041 MYR/tonne looks good, but we need to observe the resistance in the 3500 MYR/tonne zone for further clues. We favour resistances in the 3500 MYR/tonne zone to now cap upside attempts and then fall lower again, and only a direct rise above 3650 MYR/tonne will cause doubts about this bearish view. The wave counts need a complete re look, as the present move has altered most of the big picture counts we have been tracking so far. A new impulse began from 1427 MYR/tonne and this could be the third wave which has not ended so far. We can expect a corrective fourth wave in the form of A-B-C to have begun now. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line in the indicator indicating bullishness to be intact. Therefore, look for palm oil futures to test the support levels now.

Supports are at MYR 3310, 3273 and 3225. Resistances are at MYR 3510, 3580 and 3670.

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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