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Chana prices have increased sharply in the last three weeks. Chana futures traded on the National Commodity and Derivatives Exchange (NCDEX) are up 8 per cent since January 23. Concerns of a supply short fall due to the un-seasonal rainfall in January has supported this price rise. Earlier, the price had declined from the high of ₹3,745 per quintal in December to ₹3,256 on January 27. The sharp reversal from this low has marked end of this corrective fall and also suggests that the overall uptrend is intact. This is is good point at which short-term traders can go long in this contract.
The short-term outlook is bullish for the contract. Immediate support is at ₹3,530 and the next short-term supports are at ₹3,480 and ₹3,450 – the 21-day moving average. As long as the contract trades above these support levels, a rise to ₹3,700 is possible in the coming weeks.
Traders with a short-term perspective can go long at current levels. Stop-loss can be placed at ₹3,460.
Intermediate dips to ₹3,500 and ₹3,480, if seen, can be viewed as an opportunity to accumulate fresh long positions.
The short-term outlook will turn bearish only if the contract declines below the 21-day moving average support level. Such a break can drag the contract lower to ₹3,350 which is the next key support and also the 55-day moving average level.
The medium-term trend is also up. Key medium-term support is at ₹3,300. Technically the price action since January suggests the formation of an inverted head and shoulder continuation pattern. The neckline support of this pattern is poised at ₹3,480. A rally to ₹3,800 – the target level of the inverted head and shoulder pattern can be seen over a medium-term time frame.
Traders with a medium-term perspective can hold the long positions with a wider stop-loss at ₹3,390 and for the target of ₹3,730.
The ₹3,750-3,800 is a key resistance zone which could halt the medium-term uptrend. A reversal from this zone can see the contract declining to ₹3,500 levels once again.
So traders can square-off their long positions at these levels.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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