Last week, the Crude Palm Oil (CPO) continuous futures contract on the Multi Commodity Exchange of India (MCX) plummeted seven per cent on the back of selling interest and profit booking. The June month contract is down by 0.5 per cent and was trading at around ₹1,119 per 10 kg on Monday. In late January this year, the contract took support at around ₹900 and continued to trend upwards. Since then, the contract has been in a medium-term uptrend. After recording an all-time high at ₹1,268.6 in mid-May this year, the contract began to decline. It has been in a near-term corrective decline since then. While trending down, the contract breached its 21- and 50-day moving averages and trades well below them.

However, the contract has a key support ahead at ₹1,100. A fall below this level can pull the contract down to ₹1,080 and then to ₹1,040 levels which is 61.8 per cent Fibonacci retracement level of the prior medium-term uptrend. As long as the contract trades above the base level of ₹1,040 the medium-term uptrend stays in placed. Immediate resistance is placed at ₹1,160. A strong breakthrough of ₹1,160 will strengthen the uptrend and take the contract northwards to ₹1,200 levels. Subsequent resistances are placed at ₹1,240 and ₹1,265 levels. Traders can avoid trading in the contract as long as the contract trades in the band between ₹1,100 and ₹1,160 levels. Fresh long positions can be initiated only if the contract gains above ₹1,160 levels.

Published on May 31, 2021