Since the beginning of 2021, the continuous futures contract of cottonseed oilcake (COCUDAKL) on the National Commodity and Derivatives Exchange (NCDEX) has been rallying. That is, from about ₹2,000, the contract rallied and hit a high of ₹2,889 towards the end of April, gaining some 45 per cent.

Since that level is a resistance, the contract could not go beyond that level and reversed its trend. There was sharp drop in price in the final week of April and first week of May, when it dipped to ₹2,411, losing nearly 17 per cent.

However, the major trend being bullish, the futures swiftly reversed the trend and started moving up. Consequently, it went above the prior high of ₹2,889 and reached ₹2,950 levels. Nevertheless, the contract was unable to build another leg of rally and started to consolidate – the contract started charting a sideways trend i.e., oscillating between ₹2,750 and ₹2,950 since the beginning of June.

The decline in price that began couple of weeks back seems to have happened on the back of good downward momentum and thus, the contract slipped below the support of ₹2,750, opening the door for further weakness. The price is also now below the 50-day moving average which coincides with the support of ₹2,750.

Supporting the bearish view, the relative strength index and the moving average convergence divergence are bearish. Considering the above reasons, one can short August NCDEX-COCUDAKL futures with stop-loss at ₹2,830 for a target of ₹2,500.

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