28/01/2012 (Bloomberg) - Palm oil, used to make everything from candy bars to biofuels, may drop 5.2 percent to 2,971 ringgit ($977) a metric ton next month after it touched a level viewed as significant by some traders, said Maybank-Kim Eng.

The April-delivery contract on the Malaysia Derivatives Exchange closed below the 50-day moving average line yesterday, signaling a downtrend, said Lee Cheng Hooi, vice president of the investment bank, which is part of Malayan Banking Bhd., Malaysia’s largest lender. Palm oil may see intermediate support at 3,099 ringgit next week and 2,971 ringgit, a six-week low touched on Dec. 15, will be the next threshold, he said.

“It looks really quite weak,” Lee said by phone today. “It’s trading at the lower-end of the range on a technical basis, so this being the case the critical support will be 3,099 ringgit. If it doesn’t hold at 3,099, then you know that things are going to get worse,” he said.

The cooking oil fell 16 percent last year, the first drop in three years, on speculation that output from biggest producers Indonesia and Malaysia would climb and amid concern the European debt crisis would hurt demand. The most-active contract extended the decline by 1.3 percent this year. It closed at 3,131 ringgit yesterday and traded little changed at 3,133 at 12:29 p.m. in Kuala Lumpur today.

Palm oil faces “very firm resistance” at 3,270 ringgit, a five-month high touched on Nov. 18, Lee said in a Jan. 25 report.

Intermediate resistance remains at 3,270 ringgit, according to Mohammad Ashraf Abu Bakar, an analyst at OSK Holdings Bhd. “Support lies at the December 2011 bottom of 2,971 ringgit, a violation of which will confirm the return of selling,” he said.

Resistance refers to levels where sell orders may be clustered. Support is where there may be orders to buy. In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.