The continuous futures contract of cottonseed oilcake (COCUDAKL) on the National Commodity and Derivatives Exchange (NCDEX) declined between early April and mid-May. The price dropped from about ₹3,350 to hit a low of ₹2,700 during the third week of May. Nevertheless, the contract bounced off this level to touch ₹2,900 a week ago and has since moderated at the current level of ₹2,800.
Going ahead, the contract could decline from this level and likely drop below the low of ₹2,700. Below this level, it will most probably depreciate to ₹2,630, the nearest notable support. The subsequent support is at ₹2,550. On the upside, the contract might see a minor rally to ₹2,890 once again, before slipping below ₹2,700. Note that a breach of ₹3,000 can turn the trend positive.
Given the above factors, traders can initiate fresh short positions at the current level of ₹2,800 and add more shorts when the contract rises to ₹2,885. Therefore, the average price would be about ₹2,843. Place the initial stop-loss at ₹2,965. Revise it down to ₹2,820 when the price drops below ₹2,700. When the price touches ₹2,630, book half of the positions and tighten the stop-loss further to 2,760. Liquidate the remaining at ₹2,550.