The Crude Palm Oil (CPO) prices are under pressure. The Crude Palm Oil futures contract on the Multi Commodity Exchange (MCX) have been on a strong downtrend over the last couple of months. The contract made a high of ₹673 per 10 kg on May 22 and had reversed sharply lower from there.

The contract has plummeted 9 per cent from its high of ₹673 and is currently trading at ₹613/10 kg. The downtrend has intensified after the contract had declined below the key intermediate support level of ₹630 last week.

Outlook

The short-term outlook remains bearish for the MCX-CPO contract. The level of ₹610 has been providing support for the contract over the last few days. If the contract manages to sustain above ₹610, an intermediate bounce-back move to ₹625 or ₹630 is possible. However, a strong rise past ₹630 is unlikely as the contract is likely to get fresh selling interest at higher levels.

A pull-back move from the ₹625-₹630 resistance zone can drag the contract lower to ₹600 or ₹585. The region between ₹590 and ₹585 is a crucial long-term support zone which is likely to halt the current down-move.

The price action around the ₹590-₹585 support zone will need a close watch which will give a cue on the next trend. A strong upward reversal from this support zone may have the potential to take the contract back to ₹630 and ₹650 levels. But if the contract declines decisively below ₹585, it will increase the pressure on the contract. In such a scenario, the contract can extend its fall to ₹570 or even ₹560 over the medium term.

Trading strategy

Short-term traders can make use of an intermediate bounce to go short at ₹625 and ₹630. Stop-loss can be placed at ₹645 for the target of ₹595. Revise the stop-loss lower to ₹620 as soon as the contract moves down to ₹610.

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

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