MARKET DEVELOPMENT
Palm Oil To Test Resistance, Slip
Palm Oil To Test Resistance, Slip
04/11/2013 (Hindu Business Line) - Malaysian palm oil futures on BMD hit a one-year high on Friday on lower production expectations amid weather worries.
It was also their biggest weekly gain since December 2010 and have risen about 8 per cent so far this year. Higher production, which has kept prices depressed so far, is not likely to happen due to weather conditions now. Rain in parts of Malaysia may hamper harvests and transport which could limit supplies. The output growth this year has also been weaker-than-expected and also supporting palm prices, was a new regulation in Indonesia, which caps palm plantation areas at 100,000 hectares. Chinese New Year demand and rising biodiesel mandates in Indonesia and Malaysia are also underpinning prices.
CPO active month futures moved perfectly in line with expectations. As mentioned in the previous update, an inverted head-and-shoulder pattern is in the making targeting highs at 2,700 MYR/tonne levels or even higher. Any dips to 2,485/2,500 will hold well now. Trend line support is seen at 2,515-25 now. Highly overbought conditions warn us of corrective dips in the coming sessions. Such dips could find strong support in the 2,485-2,520 range. Currently, prices have closed above 2,625 amid high volumes and open interest. Therefore, the current uptrend could extend even higher to 2,685-2,700 levels, and then the corrective decline could begin.
However, potential targets for this move is near 2,750-2,810 range in the coming months, where several long-term resistances are bunched up. Only a decline below 2,465 could turn the picture neutral again.
As mentioned earlier, prices met an intermediate wave target at 2,135 and corrective decline to 2,345-50 levels, followed by a sharp third wave move to 2,575-2,600 materialised. The potential third wave targets are near 2,750-2,800 levels now. RSI is in the extreme overbought zone warning of a corrective decline in the coming sessions. The averages in MACD have once again gone above the zero line of the indicator hinting at a bullish reversal now. Only a crossover below the zero line again could again hint at weakness.
Therefore, look for palm oil futures to test the resistances and correct lower subsequently.
Supports are at MYR 2,570, 2,520 and 2,485. Resistances are at MYR 2,650, 2,685 and 2,745.
(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.t@gmail.com.)
It was also their biggest weekly gain since December 2010 and have risen about 8 per cent so far this year. Higher production, which has kept prices depressed so far, is not likely to happen due to weather conditions now. Rain in parts of Malaysia may hamper harvests and transport which could limit supplies. The output growth this year has also been weaker-than-expected and also supporting palm prices, was a new regulation in Indonesia, which caps palm plantation areas at 100,000 hectares. Chinese New Year demand and rising biodiesel mandates in Indonesia and Malaysia are also underpinning prices.
CPO active month futures moved perfectly in line with expectations. As mentioned in the previous update, an inverted head-and-shoulder pattern is in the making targeting highs at 2,700 MYR/tonne levels or even higher. Any dips to 2,485/2,500 will hold well now. Trend line support is seen at 2,515-25 now. Highly overbought conditions warn us of corrective dips in the coming sessions. Such dips could find strong support in the 2,485-2,520 range. Currently, prices have closed above 2,625 amid high volumes and open interest. Therefore, the current uptrend could extend even higher to 2,685-2,700 levels, and then the corrective decline could begin.
However, potential targets for this move is near 2,750-2,810 range in the coming months, where several long-term resistances are bunched up. Only a decline below 2,465 could turn the picture neutral again.
As mentioned earlier, prices met an intermediate wave target at 2,135 and corrective decline to 2,345-50 levels, followed by a sharp third wave move to 2,575-2,600 materialised. The potential third wave targets are near 2,750-2,800 levels now. RSI is in the extreme overbought zone warning of a corrective decline in the coming sessions. The averages in MACD have once again gone above the zero line of the indicator hinting at a bullish reversal now. Only a crossover below the zero line again could again hint at weakness.
Therefore, look for palm oil futures to test the resistances and correct lower subsequently.
Supports are at MYR 2,570, 2,520 and 2,485. Resistances are at MYR 2,650, 2,685 and 2,745.
(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.t@gmail.com.)