NCDEX-Chana (₹4,635 per quintal): BUY


Chana futures contract traded on the National Commodity and Derivatives Exchange (NCDEX) has been in a strong uptrend since last October. This rally has strengthened since April this year due to the unseasonal rainfall which has increased the concerns of a reduced output because of crop damage. Also there is a sharp fall in the area under cultivation this year which adds to the supply worries. All these factors continues to keep the uptrend intact and there is room for the rally to extend in the coming weeks. This offers a good opportunity for traders to take long position in the contract.

Short-term view

The price action from May 6 to May 15 suggests the formation of a wedge. A bullish breakout of this pattern was witnessed on Monday, indicating the resumption of the overall uptrend in the contract. Key short-term support is in ₹4,600-₹4,575 zone. An immediate break below this support zone looks unlikely. A rise to ₹4,800 looks possible now.

Traders with a short-term perspective can go long. Stop-loss can be kept at ₹4,570 for the target of ₹4,780. Intermediate declines to ₹4,600 can be used to accumulate long positions.

The short-term outlook will turn negative only if the contract records a strong break and close below ₹4,575. Such a break can drag the contract lower to ₹4,400 and ₹4,350 there after.

Medium-term view

The medium-term outlook is also bullish. The contract is headed all the way to test its previous high of ₹4,999 recorded in October 2012. This level will be crucial to watch. Whether the contract will break above ₹4,999 or revers lower from there will decide its next trend. A strong break above ₹4,999 will take the contract to the next targets of ₹5,500 or even ₹6,000.

On the other hand, failure to breach ₹4,999 and a reversal from there will trigger a corrective fall towards ₹4,000 levels. Given the sharp and a continuous rally since last October, the contract is more likely to take a pause at ₹4,999 and reverse lower for a minor pause.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

Published on May 19, 2015


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