The continuous futures contract of cottonseed oilcake (COCUDAKL) on the National Commodity and Derivatives Exchange (NCDEX), after hitting a high of ₹3,440 in early January this year, lost the upward momentum and changed direction downwards.

The price declined in the subsequent weeks and it hit a two-month low of ₹3,099 by the end of February.

Although the price has rebounded to the current level of ₹3,165, cottonseed oilcake futures is facing a strong resistance between ₹3,180 and ₹3,200. A falling trendline resistance coincides at this price area, making it a strong barrier. Therefore, the contract is less likely to go past ₹3,200. Even if it manages to go beyond this level, the upside can be capped at the subsequent resistance at ₹3,300.

But note that a decisive breach of ₹3,300 can bring back the bullish sentiment where the contract can rally past the prior high of ₹3,440.

A fall from the current level of ₹3,165 can drag the contract to ₹3,000 initially. A break below this level can drag the contract to ₹2,930 and then possibly to ₹2,875 in the coming weeks.

So, traders can short 75 per cent of the intended amount at current level and add remaining 25 per cent short positions when the price rallies to ₹3,225. Place initial stop-loss at ₹3,300. When the contract declines to ₹3,000, book 50 per cent of your position and revise the stop-loss to ₹3,180.

On further fall to ₹2,930, book 25 per cent of the shorts and tighten the stop-loss to ₹3,050. Liquidate the leftover short position at ₹2,875.