04/01/2018 (The Edge Markets MY) - SINGAPORE (Jan 3): Palm oil may test a resistance zone of RM2,694-2,707 per tonne in three months, a break above which could lead to a further gain to RM2,814.

The zone is formed by the 50% retracement of the uptrend from the July 12, 2016 low of RM2,186 to the Dec. 19, 2016 high of RM3,202, and the 61.8% projection level of an upward wave c, the third wave of a presumed three-wave cycle from the June 13, 2017 low of RM2,425.

This wave may extend to RM2,887 at its full capacity, if the cycle turns out to be a flat. At least it could travel to RM2,707, which is indicated by a small double-bottom around RM2,417 as well.

 The current rally looks like a mirror image of the drop from the May 15, 2017 high of RM2,688. Under this assumption, palm oil may approach the target zone as well.

A break above RM2,707 will be critical in confirming an extension of the wave c towards RM2,887. The break will also eliminate the chance of a drop towards RM2,417.

A failure to break the zone of RM2,694-2,707 could cause a loss to RM2,574.