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Commodity Tips, Palm oil futures test key resistance levels
Malaysian palm oil futures ended sharply higher on Monday to rise over 1 percent in the second session, as market participants forecast improving demand in January and lower production in the coming months.
CPO active month March moved higher as expected. As mentioned earlier, though the near-term picture still looks mixed with a mild bearish bias in the short-term, it still does not show any major change in the big picture which is still friendly.
The upward retracement from 2,420 MYR/tonne has been impressive with good volumes, making us believe a possible intermediate bottom is in place. A close above 2,560, a previous support that was broken when prices went to 2,420, has further instilled bullish hopes.
Today's price action of finding support exactly from there should see prices testing 2,652 MYR/tonne a minor resistance on its way up, with a stronger one around $2685-2700 MYR/tonne levels. The 2615-2715 is a gap that was created earlier, which could potentially get filled. As illustrated earlier, despite the corrective declines from time to time, the bigger picture bullish trend still remains intact. Though it looks like a head and shoulder has been confirmed, such a pattern coming after a recent double bottom has more chances to fail, which is why we are still holding on to a medium-term bullish outlook.
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