Commodity Calls

Upmove in crude palm oil gains momentum

Gurumurthy K BL Research Bureau | Updated on February 06, 2019 Published on February 07, 2019

Crude Palm Oil (CPO) prices have been surging over the last two months. The CPO futures contract on the Bursa Malaysia Derivatives Exchange made a low of MYR 2,078 per tonne in November 2018 and has risen sharply from there.

The contract has surged over 11 per cent from the low and is currently trading at MYR2,306 per tonne.

On the domestic front, the CPO futures contract on the Multi Commodity Exchange (MCX) made a low of ₹483.4 per 10 kg in early December 2018 and has reversed sharply higher from there.

The contract has surged about 17 per cent since then and is currently trading at ₹567 per 10 kg.

Outlook

The outlook for CPO (MYR 2,306 per tonne) remains intact. Prices are likely to rise further in the coming days. The Malaysian CPO contract has formed a strong base around MYR 2,100 between November and December last year. The level of MYR 2,125 is now a strong short-term support for the contract, which can limit the downside. Intermediate dips to this support are likely to find fresh buyers coming into the market.

An upmove to MYR 2,355 is likely in the coming days. A strong break above MYR 2,355 will then increase the likelihood of the contract extending its rally towards MYR 2,450 and MYR 2,550 over the medium term.

On the domestic front, the MCX-CPO (₹567 per 10 kg) futures contract has an immediate resistance at ₹580, which is likely to be tested in the near term. Inability to breach this hurdle can trigger a pull-back to ₹550 or ₹540.

However, the overall outlook will continue to remain bullish.

A further fall below ₹540 looks unlikely at the moment.

A surge from the ₹550-540 support zone and a subsequent strong break above ₹580 will then pave the way for a fresh rally to ₹600 and ₹610 over the medium-term.

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

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