Go long on mustard seed futures

Akhil Nallamuthu BL Research Bureau | Updated on May 13, 2021

It was trading in a broad range of ₹5,300 and ₹6,300

The continuous futures contract of mustard seed (RM seed) on the National Commodity and Derivatives Exchange (NCDEX) has been trading sideways since October last year. It was trading in a broad range of ₹5,300 and ₹6,300.

But the rally that began in early April from about ₹5,600 levels has been so strong that the futures breached the upper boundary of the range i.e., ₹6,300 during the second week last month. The volume and the open interest of the most active expiry i.e., June series, have been steadily increasing over this period and usually breakouts with good volume leads to sustainable rallies. Therefore, the recent breakout has resulted in resumpiton of buyers interest which will result in further increase in price.

Besides, indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart shows bullish inclination. While the RSI is showing a fresh uptick after moderating a bit, the MACD, which stayed flat over the past month, is now pointing upwards. Also, the average directional index, the indicator that denotes the strength of a trend, displays good strength in the rally.

Although the June contract softened towards the end of last month, it regained the positive momentum during the past month and consequently, it rallied past the prior high of ₹7,464. Given the above factors, traders can go long in NCDEX mustard seed futures with stop-loss at ₹7,250. Potential near-term target can be ₹7,900.

Published on May 12, 2021

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