21/11/2011 (Hindu Business Line) - Malaysian palm oil futures on the Bursa Malaysia Derivatives Exchange ended higher on Friday supported by lower output expectations due to a heavy monsoon and strong Chinese demand, although Eurozone debt jitters capped the upside. Strength is seen in the fourth quarter and first quarter of next year, due to the onset of the monsoon season. Lower output is expected as top producers Indonesia and Malaysia enter the rainy season. Palm oil demand is expected to remain robust. Exports of Malaysian palm oil products for November 1-15 rose, cargo surveyors Intertek Testing Services and Societe Generale de Surveillance said earlier this week.

Crude palm oil futures are moving in line with our expectations. As expected, a move to MYR3,245-3,250 levels was seen. We favour a corrective decline to above mentioned supports in the coming sessions. However, the bigger picture now looks set for a good rally up in the medium term. Prices corrected from this range after displaying overbought conditions. At present, we favour rallies to MYR3,285-3,300 a tonne to cap upside attempts for a push to MYR3,150 a tonne or even lower to MYR3,075 a tonne being an important support level and also a Fibonnaci retracement point. We favour a corrective decline to above mentioned supports in the coming sessions and subsequently a move to MYR3,350 a tonne.

We believe the impulse that began from MYR1,427 a tonne, which hit MYR4,486 a tonne, ended and a prolonged corrective move has possibly ended at MYR1,335 a tonne. In the big picture, a new impulse began from MYR1,335 a tonne and the third wave with a projected objective of MYR3,900 a tonne has been met. A corrective wave ‘B' has met one potential target near MYR 3,465 a tonne. A wave ‘C' kind of a decline ended at MYR2,755 a tonne itself. A possible new impulse has begun now with immediate targets in the MYR3,350-3,365 a tonne range. The relative strength index is in the overbought zone now, indicating a possible corrective decline in the coming sessions. The averages in MACD have gone above the zero line of the indicator, indicating a bullish reversal. Only a crossover below the zero line again could hint a resumption of the bearish trend.

Therefore, look for palm oil futures to test the resistance levels and then correct lower.

Supports are at MYR3,230, MYR3,150 and MYR3,075. Resistances are at MYR3,285, MYR3,320 and MYR3,365.