Cottonseed oilcake prices have been surging since late April. The futures contract on the National Commodity and Derivatives Exchange (NCDEX) made a low of ₹1,166 per quintal on April 30 and has reversed sharply higher from there. The contract has shot up 57 per cent from the lows and is currently trading at ₹1,825 per quintal. Strong demand from the spot market and from the animal feed-making industries coupled with a short supply due to lack of stocks and fall in arrivals are the triggers for the sharp rally in prices.

Outlook

A crucial resistance for the NCDEX-Cotton Seed Oilcake contract is near current levels at ₹1,850, which is likely to be tested in the near term. But a strong break above this will boost the momentum. Such a break will take the contract to ₹1,950 over the short term. A further break above ₹1,950 will increase the likelihood of the contract extending its rally to ₹2,100 over the medium term.

But if the contract fails to breach the immediate resistance at ₹1,850, a pull-back move is possible in the coming days. A dip to ₹1,750 or ₹1,700 is likely in such a scenario. Also, it may remain range-bound between ₹1,700 and ₹1,950 for a while.

The outlook for the contract will turn negative only if it decisively closes below ₹1,700. Such a fall can drag the contract lower to ₹1,600 or even ₹1,550 on the back of selling pressure.

But such a fall looks less probable as the indicators show positive signals. The 21-week moving average is on the verge of crossing over the 55-week moving average. This is a positive sign indicating that the downside could be limited. As such, the possibility is high of the contract sustaining above ₹1,700 in the coming days.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

Related Topics
comment COMMENT NOW