SINGAPORE (March 29): Palm oil may end its current downtrend around a support at RM2,533 per tonne and then resume its uptrend from the Aug 25, 2015 low of RM1,863 over the next three months.

The support is provided by the 50% Fibonacci retracement on the uptrend from RM1,863 to the Dec 16, 2016 high of RM3,202, a break below it could cause a loss limited to RM2,374.

The downtrend has been driven by a wave (b), the second wave of a presumed three-wave cycle from RM1,863. This wave will be totally reversed by an upward wave (c).

The cycle is far from complete, as it followed a bigger bearish cycle from the March 2008 high of RM4,486. This bearish cycle has been developing within a triangle.

Palm oil has failed to escape from this pattern at its first attempt. However, this attempt has pointed north for the future move, as the triangle looks more like a bullish continuation pattern.

A Fibonacci retracement analysis on the uptrend from RM1,863 to the March 29, 2016 high of RM2,793 reveals that the correction from RM2,793 ended around the 61.8% retracement of RM2,218.

The current correction from RM3,202 could be slightly weaker, to end around RM2,533. A more optimistic scenario will be that palm oil consolidates further above RM2,691 and then resumes its uptrend.

A rise above the March 22 high of RM2,839 will be the first signal to indicate the resumption of the uptrend. A break below RM2,533 could cause a further loss to RM2,374.

(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.)

(US$1 = RM4.4430)