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The continuous futures contract of cottonseed oilcake (COCUDAKL) on the National Commodity and Derivatives Exchange (NCDEX) broke below the important support band of ₹3,000-3,015 last week and extended the decline. It made a low of ₹2,800 on Monday and has bounced off a bit to the current level of ₹2,860.
The price level of ₹2,800 is support where a rising trendline also coincides, making it a key level. Although the overall bias seems to be bearish, the contract might witness a corrective rally towards the price band of ₹3,000-3,015.
However, this is not a given and so, risk-averse traders can stay away from longs and avoid countertrend calls. It is worth noting that the downtrend will most probably resume after the contract moves up to the above-mentioned price band.
Consider fresh longs
Considering the above factors, traders with a higher risk appetite can consider fresh longs. But note that it is a short-term trade and so, stick to the stop-loss and target levels strictly. That is, buy at the current level of ₹2,860 and place stop-loss at ₹2,780.
When the contract surpasses ₹2,740 move the stop-loss upward to ₹2,840. Liquidate the longs when the contract hit ₹3,000. Fresh trades henceforth can be decided based on how the contract reacts to the price band of ₹3,000-3015.
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