Palm oil may bounce into 3,592-3,631 ringgit range before falling

SINGAPORE: Palm oil may bounce moderately into a range of 3,592-3,631 ringgit per tonne, before falling again.

The contract seems to have temporarily stabilised around a support at 3,504 ringgit, as indicated by two hammers. This support is strengthened by another one at 3,502 ringgit, the Dec. 29, 2020 low.

Chances are high that a moderate bounce will occur on Friday. A break below 3,504 ringgit could open the way towards the 3,381-3,426 ringgit range.

The bounce looks like a pullback towards a resistance at 3,581 ringgit on the daily chart, which is the 76.4% projection level of an upward wave C from 2,691 ringgit.

The depth of the fall from the Jan. 6 high of 3,888 ringgit strongly suggests a completion of a wave C from 2,691 ringgit. The contract may resume its fall towards 3,411 ringgit, after completing the weak bounce.

The purpose of the correction could be to cover a gap forming between Dec. 31, 2020 and Jan. 4. A more bearish scenario indicates the completion of a five-wave cycle from the Oct. 2, 2020 low of 2,691 ringgit.

Under this scenario, the correction could be towards the bottom of the wave 4 around 3,200 ringgit. Resistance is at 3,757 ringgit, a break above which could lead to a gain to 3,835 ringgit.

On the daily chart, the drop triggered by the key resistance at 3,856 ringgit looks so decent that it suggests a completion the wave C from 2,691 ringgit.

Unless the contract could stabilise around 3,698 ringgit and resume its rise towards 3,856 ringgit, a further fall towards the 3,411-3,581 ringgit range will be highly likely.

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