The trend in castor seed has been bearish since mid-January this year. The futures contract on the National Commodity and Derivatives Exchange (NCDEX), after declining below a key level at ₹6,850 in the second week of February, has confirmed a bear trend. It is currently trading around ₹6,120.
In line with expectations, a corrective rally was seen this month until last week. Nevertheless, the upside was capped at the resistance of ₹6,270, post which futures resumed their downtrend. We expect the contract will see a further decline, possibly to ₹5,780 in the near-term.
The contract should decisively break out of ₹6,600 for the trend to turn bullish. Until then, the inclination will be bearish and we recommend that traders opt for short positions.
Trade strategy
A couple of weeks ago, we advised initiating short positions at the average price of ₹6,180. Stop-loss for this trade was suggested at ₹6,420. Retain this trade.
Going forward, modify the stop-loss to ₹6,020 when the contract falls below ₹5,900. Liquidate the shorts at ₹5,780.