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The continuous futures contract of chana on the National Commodity and Derivatives Exchange (NCDEX), which has had a good year so far, is facing a downtrend of late.
After registering a high of ₹5,896 in mid-April, the contract has been slipping.
Though it attempted to recover in early May on the back of the support at ₹5,300, bulls could not gather enough momentum and again fell after facing resistance at ₹5,540.
But this time, the support at ₹5,300 was breached on Tuesday and the June contract closed at ₹5,191, turning the trend downwards.
The contract has formed lower high and lower low, a bearish signal. The price is now below the 50-day moving average (DMA).
Other signals asserting the weak outlook are indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart. While the former has slipped below the mid-point level of 50, the latter shows that the bears are having an upper hand over the bulls.
Traders can take bearish view and go short on NCDEX chana futures on rallies with stop-loss at ₹5,320.
The nearest support is the critical price band of ₹4,950 and ₹5,000. The 61.8 per cent retracement level of the prior rally lies at ₹4,950, making it a key base.
A breach of this level can drag the contract to ₹4,850.
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