The Hindu Business Line : Malaysia palm oil seen range-bound

CRUDE palm oil futures on the Malaysian Derivatives exchange, or MDEX, closed lower on Friday in choppy trade with the market seeking fresh direction after the recent volatility in prices, which took it to yearly highs. Prices could remain choppy until a clearer trend develops.

Cargo surveyor Societe Generale de Surveillance (SGS), estimated Malaysian palm oil exports for June 1-20 at 601,193 tonnes, up from 574,449 tonnes for May 1-20. Though export figures were slightly above expectations, there were concerns about export performance in coming months given the high palm oil prices which could discourage buying from major importers like India, and as soyaoil supplies start to flood the market.

Crop forecaster PALMIS Management Sdn Bhd on Thursday estimated Malaysia's end-June palm oil stocks at 880,000 tonnes, down from the official 929,472 tonnes at end-May. It put palm oil output in June at 960,000-965,000 tonnes, up from the official 924,797 tonnes in May. Exports in June were estimated at 885,000-890,000 tonnes, compared with the official 939,971 tonnes in May.

Soyaoil futures on the Chicago Board of Trade followed a drop in soyabean futures as commodity funds liquidated their long positions on expectations of a jump in US soya acres.

A choppy week with an uncertain direction from here looms large on the market.

Last week's fall, after a failure to test the crucial 1500 Malaysian ringgit (MYR) a tonne mark, has made prices to head southwards. If the current levels do not sustain, it will not be difficult to assume prices getting into the 1200 MYR/tonnr levels again.

After the last week's failure to test 1500 MYR/tonne level, a double top pattern is visible on the charts, which is bearish in nature targeting 1270 MYR/tonne on the downside. This also coincides with the 61.8 per cent retracement target from 1,113-1,498 ringgits.

The elliot wave structures could become bearish if prices went below 1270 MYR/tonne. Though prices look bearish from here, this bullishness could still sustain if it manages to find support within the 1330-1350 range.

RSI is back in the neutral zone and has enough time to get into the oversold zone from where an up ward correction can be expected. The averages, in MACD, are still above the zero line in the indicator. And as long as it remains above the zero line in the indicator a clear bearish trend will not set in. Prices are below the short-term moving averages of 9 day EMA and the 50-day EMA is at 1,330 MYR/tonne.

Therefore, expect prices to range-bound and test the support levels from here. Resistances at MYR 1,397, 1,405 and 1,436 ringgits and supports at MYR 1,358, 1,330 and 1,295 ringgits.

CBOT soyoil seems to be heading for a fall with crucial support at 17.50 cents . A break of this level will be bearish for the July contract.

(The author is a Chennai-based technical analyst who tracks the international commodities futures markets. This analysis is based on historical price movement of the commodity concerned. There is risk of loss in trading. )

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