SINGAPORE (April 12): Palm oil is biased to break a resistance at RM2,626 per tonne and rise into the range of RM2,655-2,701, as suggested by its wave pattern, a Fibonacci retracement analysis and the hourly MACD.
The drop from the March 6 high of RM2,898 could be broken down into five waves. A five-wave cycle may have completed, even though this cycle looks a bit strange, as the wave 4 not only overlaps with the wave 1, but also is much smaller compared to the wave 1.
The bullish divergence on the hourly MACD simply indicates an exhaustion of the downtrend. A bottom could be seen soon.
The five-wave structure and the divergence make much sense when they are put together with a Fibonacci retracement analysis on the daily chart. This analysis reveals a key support at RM2,574, the 61.8% retracement of the uptrend from the July 12, 2016 low of RM2,186 to the Dec 16, 2016 high of RM3,202.
Chances are palm oil may hover above this support for a few days or bounce towards RM2,694.
(Wang Tao is a Reuters market analyst for commodities and energy technicals. The views expressed are his own. No information in this analysis should be considered as being business, financial or legal advice. Each reader should consult his or her own professional or other advisers for business, financial or legal advice regarding the products mentioned in the analyses.)