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The November futures contract of chana on National Commodity and Derivatives Exchange (NCDEX) established a strong rally in late August, where the price rose from ₹4,500 level to mark a high of ₹5,670 in the first week of October.
But since then, the contract has gradually been declining and last week it slipped below the 21-day moving average (DMA). Notably, it has formed a lower-low on Monday, indicating that bears are growing stronger.
Hovering around ₹5,250, the nearest support for the contract can be ₹5,150. On subsequent decline, it can find support of the 50-DMA which is at ₹5,070. Below that level lies the crucial base of ₹5,000. On the upside, resistances from the current level are at ₹5,380 and ₹5,420.
The daily relative strength index has been declining along with the price and it has entered the bearish zone; whereas the moving average convergence divergence indicator is tracing a downward trajectory. These are bearish indications.
Because of the above factors, traders can be bearish and short the contract on rallies with stop-loss at ₹5,420.
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