Commodities

NCDEX castorseed (₹4,084/quintal): Buy

Gurumurthy K BL Research Bureau | Updated on January 23, 2018

CASTORSEED

The castorseed futures contract traded on the National Commodity and Derivatives Exchange has surged about 4 per cent in the past week. This rally has turned the short-term outlook bullish for the contract.

Increase in demand in the domestic spot market at the time when the arrivals were restricted has aided this rise in the commodity price.

Rising export demand is also supporting the price. The contract is likely to move higher from current levels of ₹4,084 a quintal. This offers a good opportunity for traders with short-term view to initiate long position in the contract.

Short-term view: The contract was stuck inside the range between ₹3,800 and ₹4,000 for about three months. The rally in the past week has helped to break this range. The level of ₹4,000 will act as a good support for the contract. Immediate resistance is at ₹4,115 – the 200-day moving average.

A strong break above this hurdle in the coming days can take the contract higher to ₹4,225 – the 38.2 per cent Fibonacci retracement resistance level initially. A further break above this level can see the contract moving higher to the next target of ₹4,330.

If the contract fails to break above the 200-day moving average in its first attempt, then an intermediate dip to test the support at ₹4,000 is possible. But this support is likely to limit the downside and the contract is expected to reverse higher again from there.

Traders with a short-term perspective can go long. Stop-loss can be kept at ₹3,980 for the target of ₹4,300. Intermediate dips to ₹4,000 can be used to accumulate long positions.

The key short-term support for the contract is poised at ₹3,880. The outlook will turn bearish only if it records a strong break and close below this level. But such a break looks unlikely at the moment.

Medium-term view: The strong downtrend that was in place since December 2014 halted at ₹3,500 in February this year.

The contract had then formed a strong base by consolidating sideways in between ₹3,500 and ₹3,700 until April. The subsequent rally to the current levels of ₹4,100 signals a trend reversal.

But the confirmation of this reversal will emerge only after the contract records a decisive break above the Fibonacci retracement resistance at ₹4,225. Such a break will open doors for a further rally to ₹4,500.

Published on August 18, 2015

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