03/03/2012 (Business Line) - Malaysian palm oil futures on Bursa Malaysia Derivaties exchange ended lower on Friday on profit-taking ahead of the Bursa Malaysia Palm Oil Conference next week where analysts are expected to present views on vegetable oil markets. Surging energy prices continue to support the edible oil markets. Energy prices slipped lower on Friday after surging 5 per cent to an 11-month high a day earlier, as fears of a supply disruption from Saudi Arabia eased. However, concerns over economic growth due to higher energy prices could cap gains going forward as the consuming countries begin to depreciate making cost of imports higher. Cargo surveyors have reported up to a 10.5 per cent drop in February exports from a month ago even though demand from China and India has been resilient.

CPO May futures are higher perfectly in line with our expectations. As mentioned in the previous update, a close above 3,240 Malaysian (MYR) a tonne has opened the possibility of rise higher towards 3,700 MYR/tonne in the coming months. No change in view. Initial resistance is at 3,350 MYR/tonne, from where a corrective decline can be seen. Support is now seen in the 3,245-50 MYR/tonne zone followed by important support at 3,215 MYR/tonne. Favoured view expects prices to find support in the 3,240-45 MYR/tonne and subsequently rise higher towards 3,350 MYR/tonne levels. Unexpected fall below 3,210 MYR/tonne could postpone the bullishness temporarily.

We believe the impulse that began from 1,427 MYR/tonne, which hit 4,486 MYR/tonne ended and a prolonged corrective move has possibly ended at 1,335 MYR/tonne. In the big picture, a new impulse began from 1,335 MYR/tonne and the third wave with a projected objective of 3,900 MYR/tonne has been met. A corrective wave “B” has met one potential target near 3,465 MYR/tonne. A wave “C” kind of a decline ended at 2,755 MYR/tonne itself. A possible new impulse has begun now with immediate near-term targets in the 3,350-65 MYR/tonne range and long-term targets at 3,700 MYR/tonne. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator indicating a bullish reversal. Only a cross-over again below the zero line again could hint at resumption in the down trend.

Therefore, look for palm oil futures to test the resistance levels.

Supports are at MYR 3,245, 3,215 and 3,175. Resistances are at MYR 3,310, 3,350 and 3,425.