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The outlook for the Castorseed futures contract traded on the National Commodity and Derivatives Exchange is bullish. The contract has been consolidating around the psychological ₹4,000/quintal level for more than a week now. Strong domestic spot market and increase in export demand has taken the price higher over 8 per cent in last three weeks.
The contract has a strong potential to move further higher in the coming days. This offers a good opportunity for the traders to initiate fresh long position in the contract.
Short-term view: The contract has been consolidating in a sideways range between ₹3,960 and ₹4,090 for more than a week. Key short-term support is in the ₹3,920-3,900 zone which is likely to limit the downside even if a near-term break below ₹3,960 is seen.
A rally to ₹4,200 and ₹4,225 which are the 200-day moving average and the 38.2 per cent Fibonacci retracement levels respectively looks likely in the coming days. A strong break above ₹4,225 could add momentum to the rally and take the contract further higher to ₹4,300 and to ₹4,440 there after.
Short-term traders can go long. Stop-loss can be placed at ₹3,885 for the target of ₹4,290. Intermediate declines to the ₹3,920-3,900 support zone can be used to accumulate long positions.
However, the short-term outlook will turn negative only if the contract records a decisive break below ₹3,900. Such a break can drag it lower to ₹3,800 and ₹3,700 in the short-term.
Medium-term view: The contract’s three month, February to April sideways movement between ₹3,500 and ₹3,700 suggests the formation of a base. The bullish breakout of this range above ₹3,700 and a strong rally there after last month has confirmed the reversal of the downtrend that was in place since last December.
The outlook is bullish. There is no danger of any immediate sharp fall as long as the contract trades above the key support level of ₹3,700. The recent rally can extend further to ₹4,500 in the medium term.
For the outlook to turn bearish, the contract will need to record a strong break below ₹3,500. But, such a break looks unlikely at the moment.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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