Date:13/03/2006 URL: http://www.thehindubusinessline.com/2006/03/13/stories/2006031300530700.htm

Back Palm oil likely to test support, rise

Gnanasekar. T

Malaysian crude palm oil futures ended lower on Friday after data from official MPOB showed stocks hitting a record high and exports a weaker trend.

Crucial support is at 1,445-47 Malaysian ringgit (MYR) a tonne levels and would tend to support declines in the near-term, which also happens to be the inverted head-and-shoulder pattern neckline support point.

We still feel prices could slowly edge higher towards 1,566 MYR/tonne in the coming months or even higher towards 1,600 MYR/tonne. Only, an unexpected move below 1,408-10 MYR/tonne can cast doubts on our overall bullish view. The move to 2,003 MYR/tonne is the end of the fifth wave impulse and a move lower from there is a corrective A-B-C pattern in the making. We are possibly in a new impulse with the first wave of the impulse ending at 1,504 MYR/tonne and the second wave ending at 1,329 MYR/tonne. We can now expect the explosive third wave to begin. Unexpected break below 1400 MYR/tonne will force us to abandon this count.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line in the indicator suggesting bullishness. Prices are below the short-term 8-period EMA at 1,472 MYR/tonne indicating short-term bearishness and the 34-period EMA is at 1,466 MYR/tonne. Therefore, look for palm oil futures to test the support levels and rise higher again.

Supports at are MYR 1,447, 1,434 and 1,418. Resistances at MYR 1,478, 1,500 and 1,523.

(The author is associated with the Multi Commodity Exchange of India Ltd. The views expressed in this column are his own and not that of his employer. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)