SINGAPORE: Palm oil may stabilise around a support at 4,298 ringgit per tonne and start a decent bounce thereafter.
The contract is riding on a wave a, which is unfolding towards its ultimate target of 4,237 ringgit, the 161.8% projection level of a downtrend from 5,069 ringgit.
A retracement analysis on the uptrend from 4,032 ringgit reveals a strong support at 4,312 ringgit, which seems to be working effectively. This support could prevent a further slide of the price towards 4,237 ringgit.
Due to a contract switch, a big gap formed which looks like an exhaustion gap. The contract is likely to cover this gap this week.
A break below 4,237 ringgit, which is the least favoured scenario, could open the way towards 4,032 ringgit.
On the much smoother chart of March contract, the downtrend from the Oct. 21 high of 4,993 ringgit could have completed, as both a wave C and a small wave c ended around their 100% projection levels.
A solid bottom has formed around 4,217 ringgit. Over the next one or two weeks, the contract is expected to rise towards 4,773 ringgit, the peak of the wave b.
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