Palm Oil May Test Support, Rise

MALAYSIA – Malaysian palm oil futures on Bursa Malaysia Derivatives exchange ended higher on Friday on prospects of erratic weather hurting production despite renewed worries about the euro zone debt crisis.

The focus is on dry weather in South America hurting soya yields and prospects of heavy South-East Asian rains disrupting palm oil production, reports Gnanasekaar .T for the Hindu Business Line.

The weather office kept its heavy rain advisory at yellow stage for Pahang, Johor and Sabah, the other major oil palm producing States.

Palm oil production in Malaysia is in the seasonally low yield phase adding to the support. The Malaysian Palm Oil Board will release official data for stocks, production and exports tomorrow.

CPO futures are moved perfectly in line with our expectations. As mentioned in the previous update, hopes of a retest of the recent highs look likely towards 3,215/3,225 Malaysian ringgit (MYR) a tonne levels.

A break above key trend line resistance at 3,199-3,200 MYR/tonne could drive prices higher towards 3,275 MYR/tonne initially and subsequently towards 3,350 MYR/tonne levels in the coming sessions.

Near-term support is at 3,135 MYR/tonne and fall below this level could postpone the bullishness and prices could correct even lower towards 3,110/15 MYR/tonne levels subsequently.

The trend still remains intact and could rise higher again towards favoured levels of 3,350 MYR/tonne or even higher. We believe the impulse that began from 1,427 MYR/tonne, which hit 4,486 MYR/tonne ended and a prolonged corrective move has possibly ended at 1,335 MYR/tonne.

In the big picture, a new impulse began from 1,335 MYR/tonne and the third wave with a projected objective of 3,900 MYR/tonne has been met. A corrective wave “B” has met one potential target near 3,465 MYR/tonne. A wave “C” kind of a decline ended at 2,755 MYR/tonne itself.

A possible new impulse has begun now with immediate targets in the 3,350-65 MYR/tonne range. 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 indicating a bullish reversal. Only a cross-over below the zero line again could hint at resumption in bearish trend.