The Castorseed futures contract traded on the National Commodity and Derivatives Exchange (NCDEX) gained over a per cent on Tuesday halting the two days of muted trading witnessed on Friday and Monday. Increase in demand while the arrivals remained limited has triggered the price rise on Tuesday. This rally has also marked the resumption of the short-term uptrend that has been in place since October. The contract is more likely to move higher in the coming days. It offers a good opportunity for short-term traders to go long in this contract.

Short-term view: The down move from the high of ₹4,324 recorded in September found strong support around the psychological level of ₹4,000. The contract has failed to break below ₹4,000 decisively in its various attempts made in October. The contract has been on a strong up-trend since recording a low of ₹3,952 on October 16. It has surged over 9 per cent from the October low to the current levels of ₹4,325.

Immediate support is in the ₹4,200-₹4,230 zone. The next strong short-term support is at ₹4,100. The outlook will be bullish as long as the contract trades above ₹4,100. A rise to ₹4,450 and ₹4,500 looks likely now. Traders with a short-term perspective can go long. Stop-loss can be kept at ₹4,185 for the target of ₹4,485. Intermediate dips to ₹4,230 and ₹4,200 can be used to accumulate long positions.

The short-term outlook will turn bearish only if the contract decisively breaks below ₹4,100. Such a break can drag the contract lower to ₹4,000 and ₹3,950 thereafter.

Medium-term view: The contract has been trading inside a bull channel since June. It is currently poised at the mid-point of this channel. There is a strong likelihood of the contract rising in the coming weeks to test the channel resistance at ₹4,500. Whether the contract manages to move past this resistance or reverses lower from there will decide the next leg of move.

A reversal from ₹4,500 will keep the channel intact. In such a scenario, the contract can fall to ₹4,100 and ₹4,000.

On the other hand, a strong break and a decisive close above ₹4,500 could boost the bullish momentum. In that case, the rally can extend further to test the next key resistances at ₹4,600 and ₹4,650.

comment COMMENT NOW