Date:22/05/2006 URL: http://www.thehindubusinessline.com/2006/05/22/stories/2006052201440700.htm

Back Palm oil may test support level

Malaysian crude palm oil futures ended lower on Friday triggered by fears of lower exports and a correction lower in soya oil prices in CBOT. The ringgit, however, lost its strength to the relief of the market and will be ignored for a while now. Falling crude prices, too, did not go well with the sentiment resulting in further long liquidation.

CPO futures headed lower gradually and are now set to test the trend line support at 1,425-28 Malaysian ringgit (MYR) tonne levels in the coming week. Prices are expected to find support from here and continue the bullish trend.

We continue to maintain our view that prices could slowly edge higher towards 1,566 MYR/tonne in the coming months or even higher towards 1,600 MYR/tonne as long as 1,380 MYR/tonne remains intact. For the bull-run to remain intact 1,415-20 MYR/tonne should be undisturbed.

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 1,375 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 have gone below the zero line in the indicator suggesting bearishness now. Prices are below the short-term 8-day period EMA at 1,451 MYR/tonne indicating short-term bearishness and the 34-day period EMA is at 1,454 MYR/tonne. Therefore, look for palm oil futures to test the support levels in the coming week.

Supports are at MYR 1,434, 1,425 and 1,410. Resistances at MYR 1,450, 1,465 and 1,478.

(The author is the director of Commtrendz Research and in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. 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.)

Gnanasekar. T