Commodity calls: Futures with cottonseed oilcake can see corrective rally

The continuous futures contract for cottonseed oilcake (COCUDAKL) on the National Commodity and Derivatives Exchange (NCDEX) broke below the important support band of ₹ 3,000-3,015 last week and extended the fall. It made a low of 2,800 INR on Monday and has risen slightly to the current level of 2,860 INR.

The price level of INR 2,800 is support, where an increasing trend line also coincides, making it a key level. Although the overall skew appears to be bearish, the contract may witness a corrective rally against the price range of 3,000-3,015 INR.

However, this is not a given, and risk-averse traders can therefore stay away from longs and avoid counter-trend calls. It is worth noting that the downward trend will most likely resume after the contract moves up to the above price band.

Consider fresh longs

Given the above factors, traders with a higher risk appetite may consider fresh lungs. But note that this is a short-term trade, so stick strictly to the stop-loss and target levels. That is, buy to the current level of 2,860 INR and place stop-loss at 2,780 INR.

When the contract exceeds INR 2,740, the stop-charge is moved upwards to INR 2,840. Cash longs, when the contract hit 3,000 INR. New trades in the future can be decided based on how the contract responds to the price range of 3,000-3015 INR.

Published on

April 27, 2022

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