Commodity outlook: Sugar prices on an uptrend; likely to hit $16.8

Malaysian palm oil futures, edged up on Monday, snapping weeks of declines, supported by mild gains in US soy oil. Falling exports and rising stocks have been a huge concern for the markets. Stockpiles at the end of October increased 7.6 per cent from the previous month to 2.72 million tonnes, while production rose 6 per cent to 1.96 million tonnes, official data from the Malaysian Palm Oil Board showed last week.

The benchmark third month February contract bounced higher from near-term support levels. We continue to hold a bearish view on edible oils with the underlying bigger trend continuing to be bearish, any upticks or unexpected rallies higher could be short-lived and prices could decline subsequently. We need to see clear evidence of a bullish reversal accompanied by volumes.
 
For now, we favour resistance to kick-in around 2,045-50 MYR/ton levels and cap upside attempts and eventually test 1,865-85 MYR/ton levels, being a strong previous support. As per the price structure in the long-term charts, a break below 2,110 MYR/ton has opened potential targets around 1,870 MYR/ton levels on the downside. Only a daily close above 2,135-40 MYR/ton levels could alter the big picture bearish view, which does not look likely in the near-term.
 
As per the wave counts, we expect a possible retracement higher towards 2,100-150 MYR/ton levels followed by a bigger decline to 1,875 or even lower. In an extreme case, a potential wave target of 1,625-45 MYR/ton is also possible, which is not our favoured scenario. RSI is in the oversold zone now indicating that an upward correction is in the offing. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal. Only a crossover again below the zero line could hint at bearishness again.
           
Therefore, look for palm oil futures to test the resistance levels and decline lower again.
 
Supports are at MYR, 1,950, 1,910 & 1,865. Resistances are at MYR 2,045, 2,100 and 2,140.
 
MCX CPO Price outlook for the period between Nov 19 - Nov 30
 
Crude palm oil futures traded up on MCX, due to bargain buying by retailers and stockists amid falling prices overseas. The rupee strength is also in play curtailing any upside moves. Else, we should see more buying to emerge.

The technical picture is one of extreme oversold conditions warning of getting excessively bearish at present levels. But, due to the prospects of further decline in the international prices further, prices could further decline to Rs 485-90 levels in December MCX futures. Resistances are at Rs 520-25 levels now.
 
So, we see any upward retracements a possible opportunity to position for a decline subsequently.
 
ICE Sugar #11 futures price outlook for the period between Nov 19 - Nov 30
 
Prices have been consolidating in a range lately, digesting most of the fundamentals. It is being well supported from concerns about India's crop, although overall supplies remained ample. India is likely to produce less sugar than forecast earlier, with mills reporting a sharp drop in sugar cane yields because of drought and infestations. The market was also underpinned by forecasts that the global market may move into deficit, possibly in 2018-19.

The technical picture hints at more upside and is slowly preparing for it moving in a broad range after a sharp fall from the highs of $23.90 all the way to $9.83, few months back. Subsequently, it has pulled back higher and now seems to working its way up to $15.50 levels in the short to medium-term. The Elliot wave targets are at $16.75-80 levels which is a slightly medium to long-term horizon.
 
We favour an upside trajectory for international prices towards $15.00 initially with supports at $12.25 followed by strong supports at $11.80.
 
Disclaimer: The author is the Director of Commtrendz Research and these are guidance for prices. He is not liable for any gain/loss arising out of it.  (He can be reached at gnanasekar.t@commtrendz.com.)