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Until the end of May this year, castor seed futures on the National Commodity and Derivatives Exchange (NCDEX) were on a steady decline. The contract dropped from about ₹7,600 to a low of ₹5,314 in the final week of May.
However, it saw the beginnings of a recovery in June. But, after reaching ₹6,450 towards the end of July, the rally exhausted and the contract slipped. Castor seed futures is currently hovering around ₹6,000.
The price action since the beginning of 2023 shows that the rally in June and July is likely to be a corrective one, and that the overall bear trend is intact. Thus, the probability of a further fall in price is high at this juncture.
While ₹5,800 is a support, given the overall bearish sentiment, the price of castor seed futures is likely to depreciate to ₹5,400.
Trade strategy
Short castor seed futures at the current level of ₹6,000; add more shorts in case the price rises to ₹6,250. Place the initial stop-loss at ₹6,500.
When the contract drops below ₹5,800, revise the stop-loss down to ₹6,020. Further tighten the stop-loss to ₹5,800 when the price falls to ₹5,600. Book profits at ₹5,500.
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