Palm oil may bounce into 3,746-3,844 ringgit range before falling in Q3

SINGAPORE: Palm oil may bounce into the range of 3,746 ringgit to 3,844 ringgit per tonne, before turning around and falling towards a zone of 2,927 ringgit to 3,232 ringgit next quarter.

The uptrend from the May 6, 2020 low of 1,939 ringgit has reversed, as suggested by the deep drop from the May 12 high of 4,525 ringgit.

The trend adopted a double-zigzag mode, consisting of seven waves. The first wave a and the first wave c are roughly equal. This equal relation exists between the second wave a and the second wave c as well.

The deep fall over the past two months has basically ruled out the possibility of a triple-zigzag. The fall adopted a corrective wave mode as well, consisting of three waves.

Even though the third wave, the wave c narrowly missed its ultimate target of 3,171 ringgit, the 161.8% projection level, it is still considered as having completed.

A further drop from this level could be limited to the strong support zone of 3,171-3,232 ringgit. The future rise is classified as a pullback towards a rising trendline. The downtrend is expected to resume upon the completion of the pullback in the target zone.

A study on the long-term weekly chart supports this bearish outlook. A giant three-wave cycle from the 2008 low of 1,331 ringgit has completed, as confirm by a projection analysis which reveals that the wave (C) from 1,863 ringgit is almost equal to the wave (A) from 1,331 ringgit.

The steep drop from the May 12 high of 4,525 ringgit could be the first leg of a big bear. The second leg may develop around 3,877 ringgit.

A break above 3,877 ringgit could signal the extension of the wave (C) towards 4,499 ringgit.