Palm oil futures will test support levels, rise

Malaysian palm oil futures ended higher on Monday evening to register their fifth session of gains, tracking strength in related edible oils and ahead of an official MPOB September data release this week. The surveys so far have indicated a marginal increase in stocks and production.

CPO active month December futures are moving on expected lines. As we mentioned earlier, a fall below MYR 2,685/tonne levels could see strong supports emerge from there. Prices moved perfectly as per expectations. It bounced from 2,653 but the volumes have not been that great, as seen in the previous bottoms, which makes us feel prices could fizzle out at higher levels.

Only a fall and close below MYR 2,645-50 levels could hint at weakness again targeting 2,610-15 levels, from where it could once start a fresh up move. But, despite chances of a further decline, the bullish trend still remains intact. The present downtrend looks like a corrective decline within a rising trend. The bigger picture continues to display bullish tendencies and we still expect prices to eventually rise higher towards resistances mentioned above.

Dips to MYR 2,705/tonne followed by 2,670-75 levels are expected to hold support in the coming week. The favoured view expects that while prices hold above 2,605-10 range, it could eventually inch higher towards targets mentioned above in the coming sessions.

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. 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.

A short-term fall below MYR 2,800/tonne levels now has caused doubts on our overall bullish expectations. The present up move from 2,425 looks impulsive with potential targets around 2,945-50, while 2,585 holds. The equality target for the present up move lies around 3,120-25 levels.

RSI 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 hinting at a bullishness to be intact. Only a crossover again below the zero line could hint at bearishness again.

Therefore, look for palm oil futures to test the support levels and rise in the coming sessions.

Supports are at MYR 2,675, 2,645 and 2,610. Resistances are at MYR 2,755, 2,770 and 2,825.

The writer is the Director of Commtrendz Research. There is risk of loss in trading.

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