MARKET DEVELOPMENT
Palm Oil May Test support, Rise
Palm Oil May Test support, Rise
26/10/2013 (Hindu Business Line) - Malaysian palm oil futures on Bursa Malaysia Derivatives ended lower on Friday, after weaker-than-expected export data fanned concerns that demand for the crude palm oil (CPO) has begun to taper. Cargo surveyor Intertek Testing Services said that shipments of Malaysian palm oil fell 0.6 per cent to 12,31,393 tonnes during October 1-25, as a lull in exports to India offset a slight increase to China and Europe.
Another cargo surveyor Societe Generale de Surveillance showed exports rise 3.8 per cent for the same period. However, prices were underpinned by expectations that output in Malaysia, could slow down and would help keep stocks under two million tonnes despite dwindling exports. Malaysia is set to impose a requirement for bio-diesel to use seven per cent palm oil, up from five per cent now, bringing down palm oil stocks and cushioning prices.
CPO active month futures moved perfectly, according to expectations. As mentioned in the previous update, a push above 2415 MYR/t could revive bullish hopes again for a move to 2,500 MYR/t or even higher. As cautioned, the 2,475-85 MYR/t could be a significant resistance to surpass in the near-term and prices came off from these levels. The technical picture is increasingly pointing towards a bullish market ahead contradicting prevailing fundamentals as cautioned. An inverted head-and-shoulder pattern is still in the making targeting highs at 2,700 MYR/t levels or even higher. Break and close above 2,505 MYR/t could be the trigger for such a rise. In the coming sessions, we expect prices to find support in the 2,410-20 MYR/t range followed by 2,375-85 MYR/t and could potentially break the crucial resistance at 2,485 MYR/t. Only an unexpected decline below 2,365 MYR/t could dash our bullish hopes.
For the time being, we will stick to the current wave counts. Only a close below 2,270 MYR/t could force to review the counts once again. The present decline has met an intermediate wave target at 2,135 MYR/t and the subsequent impulse characteristics of the present move makes us believe that it could exhaust near 2,500 MYR/t levels and then a subsequent decline to 2,345-50 MYR/t. It looks like the anticipated decline materialised. Further to this decline, a sharp third wave move looks likely for 2,575-2,600 MYR/t in the coming months.
RSI is in the neutral zone indicating that it is neither overbought nor oversold. 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 supports and then rise higher again.
Supports are at MYR 2,420, 2,385, 2,345 Resistances are at MYR 2,475, 2,500 and 2,580.
(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.)
Another cargo surveyor Societe Generale de Surveillance showed exports rise 3.8 per cent for the same period. However, prices were underpinned by expectations that output in Malaysia, could slow down and would help keep stocks under two million tonnes despite dwindling exports. Malaysia is set to impose a requirement for bio-diesel to use seven per cent palm oil, up from five per cent now, bringing down palm oil stocks and cushioning prices.
CPO active month futures moved perfectly, according to expectations. As mentioned in the previous update, a push above 2415 MYR/t could revive bullish hopes again for a move to 2,500 MYR/t or even higher. As cautioned, the 2,475-85 MYR/t could be a significant resistance to surpass in the near-term and prices came off from these levels. The technical picture is increasingly pointing towards a bullish market ahead contradicting prevailing fundamentals as cautioned. An inverted head-and-shoulder pattern is still in the making targeting highs at 2,700 MYR/t levels or even higher. Break and close above 2,505 MYR/t could be the trigger for such a rise. In the coming sessions, we expect prices to find support in the 2,410-20 MYR/t range followed by 2,375-85 MYR/t and could potentially break the crucial resistance at 2,485 MYR/t. Only an unexpected decline below 2,365 MYR/t could dash our bullish hopes.
For the time being, we will stick to the current wave counts. Only a close below 2,270 MYR/t could force to review the counts once again. The present decline has met an intermediate wave target at 2,135 MYR/t and the subsequent impulse characteristics of the present move makes us believe that it could exhaust near 2,500 MYR/t levels and then a subsequent decline to 2,345-50 MYR/t. It looks like the anticipated decline materialised. Further to this decline, a sharp third wave move looks likely for 2,575-2,600 MYR/t in the coming months.
RSI is in the neutral zone indicating that it is neither overbought nor oversold. 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 supports and then rise higher again.
Supports are at MYR 2,420, 2,385, 2,345 Resistances are at MYR 2,475, 2,500 and 2,580.
(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.)