The Hindu Business Line (05/02/2018) - Malaysian palm oil futures ended higher on Monday, first in three sessions, on short-covering, as ringgit weakened. Palm was also supported by short-covering and forecasts of lower output for January 2018.

CPO active month April contract moved as per expectations. As mentioned earlier, positive indications are emerging though it is uncertain to confirm it just yet. As we have been maintaining, volatile moves have been seen so far, but we are still hopeful of a recovery. A bounce from MYR 2,433/tonne, close to the double bottom low of 2,417, has revived bullish hopes and the possibility of a triple bottom, a potentially bullish formation. Once again the trend line support at 2,445 has held attempts to decline. A retracement to 2,550looks likely now with intermediate resistance at 2,510-15 . A close above here can hint at further upside to 2,595 followed by 2,620-25 in the coming sessions. In the bigger picture, the 2,695-2,725 is a gap that was created earlier, which could potentially get filled.

Only a direct fall below, 2,420-25 could see prices testing 2,360-70and then retrace higher. On the other hand, a direct rise above 2,525 could see a retracement higher immediately. The favoured view still expects, while prices hold above supports in the broader picture, it could eventually inch higher.

Wave counts: A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive. As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower towards 2,425 or even lower to 2,225 , and then rise towards a medium- to long-term target at 3,600 , which could bring this current impulse to an end. But a short-term fall below 2,800 now has caused doubts on our overall bullish expectations. The present up move from 2,425 looks impulsive with potential targets around 2,945-50 while 2,585 holds. The equality target for the present up move lies around 3,120-25 . But a fall below 2,530 has changed the counts and we will review it in the next update.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at bearishness to be intact. Only a crossover again above the zero line could hint at a bullish reversal again.

Therefore, look for palm oil futures to trade higher in the coming sessions.

Supports are at MYR 2,450, 2,420 and 2,370. Resistances are at MYR 2,515, 2,555 and 2,625.

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