MARKET DEVELOPMENT
Palm Oil to Test Support Levels
Palm Oil to Test Support Levels
25/11/2013 (Hindu Business Line) - Malaysian palm oil futures on Bursa Malaysia Derivatives Exchange ended lower on Friday on profit-taking with prospects of higher output from the world’s top producer weighing on the market. Indonesia’s palm oil output will jump 13 per cent to 29.5 million tonnes next year as more maturing plantation areas are harvested, the Indonesian Palm Oil Board estimated.
The surge in prices could also narrow palm oil’s discount to other oilseeds, and shift demand to competing oils. The beginning of the monsoon season, however, which brings heavy rains to Malaysia and Indonesia, could hamper output, as floods complicate harvesting.
CPO active month futures moved as expected. As mentioned in the previous update, any dips to 2,485/2,500 Malaysian ringgit a tonne (MYR/t) range is expected to hold well now and the current up move could extend higher to 2,685-2,700 MYR/t levels, and then a bigger corrective decline could begin from there. Prices could even rise towards the 2.750-2.810 MYR/t range in the coming months, where several long-term resistances are bunched up.
Immediate supports at 2,575-85 MYR/t levels are a rising trend line support point. A close below 2,550 MYR/t could hint at failure to capitalise on the current bullish momentum, which could bring the crucial 2,475-85 MYR/t support back.
Failure to hold support here at 2,475-85 MYR/t could further take it to 2,400 MYR/t levels. However, a direct rise and close above 2,690 MYR/t could see prices testing 2,750 MYR/t or even higher. A favoured view is a decline to the support levels mentioned above.
As mentioned earlier, prices met an intermediate wave target at 2,135 MYR/ton and corrective decline to 2,345-50 MYR/t levels, followed by a sharp third wave move to 2,575-2,600 MYR/t.
The potential third wave targets are near 2,750-2,800 MYR/t levels now. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. It is also showing a negative divergence hinting at a bigger corrective fall in the coming week. The averages in MACD are above the zero line of the indicator, hinting that the bullish sentiment will be intact. Only a crossover below the zero line again could again hint at weakness again.
Therefore, look for palm oil futures to test the supports in the coming week.
Supports are at MYR 2,585, 2,510 and 2,475 Resistances are at MYR 2,675, 2,700 and 2,750.
(The author is the Director of Commtrendz Research and is also on the advisory panel of Multi Commodity Exchange of India Ltd. The views expressed are his own. 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.)
The surge in prices could also narrow palm oil’s discount to other oilseeds, and shift demand to competing oils. The beginning of the monsoon season, however, which brings heavy rains to Malaysia and Indonesia, could hamper output, as floods complicate harvesting.
CPO active month futures moved as expected. As mentioned in the previous update, any dips to 2,485/2,500 Malaysian ringgit a tonne (MYR/t) range is expected to hold well now and the current up move could extend higher to 2,685-2,700 MYR/t levels, and then a bigger corrective decline could begin from there. Prices could even rise towards the 2.750-2.810 MYR/t range in the coming months, where several long-term resistances are bunched up.
Immediate supports at 2,575-85 MYR/t levels are a rising trend line support point. A close below 2,550 MYR/t could hint at failure to capitalise on the current bullish momentum, which could bring the crucial 2,475-85 MYR/t support back.
Failure to hold support here at 2,475-85 MYR/t could further take it to 2,400 MYR/t levels. However, a direct rise and close above 2,690 MYR/t could see prices testing 2,750 MYR/t or even higher. A favoured view is a decline to the support levels mentioned above.
As mentioned earlier, prices met an intermediate wave target at 2,135 MYR/ton and corrective decline to 2,345-50 MYR/t levels, followed by a sharp third wave move to 2,575-2,600 MYR/t.
The potential third wave targets are near 2,750-2,800 MYR/t levels now. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. It is also showing a negative divergence hinting at a bigger corrective fall in the coming week. The averages in MACD are above the zero line of the indicator, hinting that the bullish sentiment will be intact. Only a crossover below the zero line again could again hint at weakness again.
Therefore, look for palm oil futures to test the supports in the coming week.
Supports are at MYR 2,585, 2,510 and 2,475 Resistances are at MYR 2,675, 2,700 and 2,750.
(The author is the Director of Commtrendz Research and is also on the advisory panel of Multi Commodity Exchange of India Ltd. The views expressed are his own. 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.)