Malaysian palm oil futures on the Bursa Malaysia Derivatives ended down falling for a third straight day on weakness in soya oil on the Chicago Board of Trade. The Malaysian Palm Oil Board had reported on Friday that July end-stocks in Malaysia rose by 1.3 per cent to 2.21 million tonnes in a second month of gains, while exports grew by 6.8 per cent from June to 1.21 million tonnes. Production was up 12.8 per cent from the previous month to 1.5 million tonnes.
The benchmark third month October contract inched up higher as per our expectations, but could not sustain at higher levels. A possible double bottom formation and other statistical indications point to a possible intermediate bottom that has been made at MYR 2,140/tonne levels. Prices could find support again in the region of 2,175-2,200 and then try to inch up. The bigger picture price structure does not yet confirm a bottom in place. But, a close above 2,300 could reinforce bullish expectations.
The favoured view in the bigger picture expects that while downticks to 2,170-75 or even lower to 2,145-50 holds, we can expect an upside in the coming sessions. For now, we favour resistances around 2,225 followed by 2,245-50 in the coming sessions. In the big picture, we still anticipate more declines to 2,100 levels in the coming months.
Wave counts: We will now re-assess the wave counts, as prices have crossed over above MYR 2,370-2,400. 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. The medium- to long-term bullish expectations have been dented on a fall below MYR 2,655/tonne. Only a close above MYR 2,640 could alter the wave counts again, which is not our favoured view.
RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at bearish to be intact. Only a crossover again above the zero line could hint at a bullish reversal.
Therefore, look for palm oil futures to edge lower again. Supports are at MYR 2,175, 2,145 and 2,100. Resistances are at MYR 2,225, 2,245 and 2,275.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.