The uptrend in the Crude Palm Oil (CPO) price, which has been in place since August, paused in early September. The CPO futures contract price on the Bursa Malaysia Derivatives Exchange fell from MYR 3,335 per tonne in February to around MYR 2,600 in April. Since then, it has been consolidating in a sideways range between MYR 2,600 and MYR 2,900. Within this range, the contract is currently trading at MYR 2,730.

On the domestic front, the CPO futures contract on the Multi Commodity Exchange (MCX) has been in a strong uptrend since the August low of ₹475.2 per 10 kg. This upward move paused at a high of ₹551.5 in September.

The contract, however, has come off from there and is currently trading at ₹535/10 kg. The price action over the last month suggests that the CPO prices are in consolidation within the overall uptrend. There is a strong likelihood of the price resuming its uptrend in the coming weeks.

Outlook

The Malaysian CPO contract has crucial supports at MYR 2,600 and MYR 2,560. A key resistance is in the band between MYR 2,875 and MYR 2,900. As long as the contract sustains above MYR 2,600, the possibility is high of it breaking above MYR 2,900. Such a break can take it higher to MYR 3,000 initially. A further break above MYR 3,000 can boost the momentum and will increase the likelihood of the upmove extending to MYR 3,200 and MYR 3,300 thereafter. The contract will come under pressure only if it declines below MYR 2,560 decisively. Such a break can pull it to MYR 2,500 initially. A further break below MYR 2,500 can drag it to MYR 2,400 thereafter.

On the domestic front, the pull-back in the MCX-CPO contract has happened from the key 61.8 per cent Fibonacci retracement level of ₹552. However, the price action since then suggests the formation of a flag on the chart, indicating the current pull-back is just a corrective fall.

The flag formation leaves the possibility high of the uptrend resuming in the coming weeks. A strong break above ₹545 will be the first sign of the uptrend resuming. A decisive break above ₹552 will confirm the same. Such a break will pave the way for the next target of ₹600.

Supports for the contract are at ₹530 and then at ₹521. The outlook will turn negative only if it falls decisively below ₹521. Such a fall can take the MCX-CPO contract lower to ₹505 or ₹490.

Traders with a medium-term perspective can go long on dips at ₹531. A stop-loss can be placed at ₹517 for the target of ₹580. Revise the stop-loss to ₹538 as soon as the contract rises to ₹550.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

Related Topics
comment COMMENT NOW