03/01/2012 (Hindu Business Line) - Palm oil futures on the Bursa Malaysia Derivatives Exchange ended higher on Friday due to concerns that heavy rainfall in growing areas of Malaysia could cause supply disruption. This was despite a weakening euro, which normally dents sentiment in commodities. Production in Malaysia is in the seasonally low-yield phase and heavy rains that threaten to disrupt production may add pressure to tightening stocks. US data on Thursday pointed to positive trends for the world's biggest economy and helped allay concerns on slowing growth. Energy prices were supported by signs of an improving US economy and Iran's threats to halt oil flow through a vital trade route.

Crude palm oil (CPO) futures are moving perfectly in line with our expectations. As mentioned in the previous update, hopes of a retest of the recent highs look likely, taking prices higher back into the MYR3,100-a-tonne zone or even higher to MYR3,185-3,200 a tonne, followed by MYR3,215-3,225 a tonne levels. Besides, the indicators have turned bullish again. A break above key trend line resistance at MYR3,199-3,200 a tonne could drive prices higher towards MYR3,275 a tonne initially and subsequently towards MYR3,350 a tonne levels in the coming sessions. A fall below MYR3,135 could postpone the bullishness and prices could correct even lower towards MYR3,115 a tonne levels.

We believe the impulse that began from MYR1,427 a tonne and hit MYR4,486 a tonne, has 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 MYR3,465 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 neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator indicating a bullish reversal. Only a cross over below the zero line again could hint at resumption in the bearish trend.

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

Supports are at MYR3,140, MYR3100 and MYR3,065. Resistances are at MYR3,200, MYR3,275 and MYR3,350.