1/31/05 Oilmandi - MALAYSIAN crude palm oil futures on BMD endedmarginally higher on Friday due to short covering. Markets will lookforward to export estimates for the month of January next week, fordirection.
Two surveyors of Malaysian oil palm cargoes, Intertek Testing Services(ITS) and Societe Generale de Surveillance (SGS), are to issue the exportestimates on Monday.
SGS, which is more closely followed, had put estimates for December at1.13 million tonnes. Recent fall in prices can be attributed to drop inestimates of Malaysian oil palm products for the period of January 1-25versus December 1-25.
Societe Generale de Surveillance, a leading tracker of Malaysian oil palmcargoes, said on Wednesday shipments for the first 25 days of January weredown 2 per cent from a month ago, increasing fears of mounting stocks.
Production has been better than expected in recent months and may continueto outperform expectations this month, which means stocks may still stayat a high level by end-January.
The third month active April contract has found minor support at 1,280Malaysian ringgits (MYR) a tonne level. Crucial support is at 1,233MYR/tonne made on August 2003, from where the rally to 2,003 MYR/tonnebegan as seen in the chart above.
Though there is a possibility to test this level or even lower at 1,195MYR/tonne, being the 61.8 per cent Fibonnaci retracement levels for themove from 683-2,003 MYR/tonne, favoured view is to look for signs ofbullish reversal.
The weekly charts still continue to show signs of reversals, as thepositive divergence is very strong. Also, indicators are in oversoldterritories and showing positive divergences.
Therefore, it is better to be cautiously bearish from hereon. The move to2,003 MYR/tonne is the end of the fifth wave impulse and a move lower fromthere is a corrective A-B-C pattern in the making.
Wave "A" ended at 1,368 MYR/tonne followed by a flat Wave "B" which thenhit 1,566 MYR/tonne. We could now be in wave "C" targeting lower levels.RSI is in the oversold zone indicating a correction to take place.
The averages in MACD are still below the zero line in the indicatorsuggesting bearishness.
Current prices are lower than the short-term 8-day EMA at 1,296 MYR/tonneand the 34-day EMA is now at 1,342 MYR/tonne.
Look for prices to test the support levels and then rise higher. Supportsat 1,276, 1,262 and 1,251 ringgits. Resistances at 1300, 1,321 anf 1,353ringgits.