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The continuous futures contract of chana on the National Commodity and Derivatives Exchange (NCDEX) has been rallying since the beginning of 2021.
By taking support at about ₹4,400, the contract rose to touch ₹5,900 in April, thereby appreciating by about 34 per cent within four months. However, the contract was unable to crack the resistance at ₹5,900 and it started to fall.
While it fell sharply from that hurdle, it found support at ₹5,150 in mid-May. The 50 per cent retracement level of the previous upswing coincides at this level, making it an important support.
The contract then started to move across a horizontal trend where it was oscillating between ₹5,150 and ₹5,330.
However, this week, the contract developed fresh bearish momentum and breached the support at ₹5,150, opening the door for further weakening.
Hence, one can remain bearish on chana at least until the price remains below ₹5,150.
Traders can short NCDEX chana futures (July expiry) with stop-loss at ₹5,200 and look for a target of ₹4,750.
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