The continuous futures contract of castor seed on the National Commodity and Derivatives Exchange (NCDEX), which was on a rally since May 2020 after taking support at around ₹3,500, lost momentum in March this year.
Since then, it has been fluctuating within the range of ₹6,940 and ₹7,600. So, the next leg of the trend can be assumed with reasonable certainty only if the contract breaches either boundaries of the range.
The recent fall has, however, dragged the contract to the range bottom and it is now trading around ₹7,035. Given that it has been held within this range for the past few months, it is safe to assume that the support at ₹6,940 is strong. So, we expect the contract to rebound from the current level and move towards ₹7,600 in one to two months.
Trade strategy
Participants can consider going long at the current level as NCDEX castor seed futures is now trading near a support. Also, the risk-reward ratio favour buy trades from here. So, traders can buy the contract with stop-loss at ₹6,850.
When the contract rises above ₹7,250, move the stop-loss to ₹7,050. When the price goes above ₹7,400, tighten the stop-loss further to ₹7,250. Exit the longs at ₹7,600.