10.04.2018 (Business Line) - Malaysian palm oil futures ended sharply lower on Monday, on position adjustment ahead of the official MPOB data due tomorrow. Palm had hit a five-week high in the previous session after Malaysia announced it would extend tax exemptions on crude palm oil (CPO) exports to a fourth straight month in April.

CPO active month June contract moved higher testing resistance levels. It also declined from there as expected, but the picture looks quite mixed from here. After testing MYR 2,510/tonne, prices dropped. It has still help above support around 2,450-55 but, the decline we anticipated after that has not materialised. As mentioned earlier, a direct rise and close above 2,450-55 here could take prices higher towards 2,525-35 again — being strong resistance levels. The 2,450-55 level will tend to hold support in the near-term now. And, failure to hold here could higher from there could turn the mildly bullish picture to weak again. It has the potential to drop to 2,395 . Only a decisive fall again below $2,360 could see further declines to 2,185-2,255 too, from where it can rebound subsequently.

The favoured view now expects that while dips to 2,450-55 holds, we can expect more upside towards 2,520 or even higher to 2,545 . We are still of the view that that the underlying bigger trend continuing to be bearish, any upticks or unexpected rallies higher could be short-lived and prices could decline subsequently. However, only a close above 2,540-45 could revive bullish hopes, which is not our favoured view now.

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 subsequently rise towards a medium- to long-term target at 3,600 , which could bring this current impulse to an end. The medium- to long-term bullish expectations have been dented on a fall below 2,655. This makes us believe that the highs at 3,105 was an end off an impulse and the targets are near 2,200 or even lower where the equality target is expected to be tested. Only a close above MYR 2,640 levels could alter the wave counts again, which is not our favoured scenario now.

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 test the resistance levels and then decline again.

Supports are at MYR 2,450, 2,400 and 2,360. Resistances are at MYR 2,510, 2,535 and 2,570.