Technical Analysis

Cottonseed Oilcake: Consider fresh longs

Akhil Nallamuthu | Updated on November 24, 2021

The continuous futures contract of cottonseed oilcake (COCUDAKL) on the National Commodity and Derivatives Exchange (NCDEX) stayed bullish since the beginning of this year and marked a fresh high of ₹3,200 in mid-August. But then the trend turned bearish resulting in a sharp decline; the contract marked a low of ₹2,315 in September. The decline was arrested as buyers came in at lower prices. Nevertheless, the contract has been largely trading in the sideways band of ₹2,400 and ₹2,635.

On Wednesday, the contract broke out of the resistance at ₹2,635, opening the door for further strengthening. The latest leg of rally began from about ₹2,450 and this is accompanied by good build up in open interest (OI) i.e., it increased to 42,160 contracts as on Tuesday compared to 35,850 contracts a week before. Therefore the rally looks strong and is like to take the contract towards ₹2,920 in about two to three months. The bullish inclination is corroborated by the relative strength index (RSI) and the average directional index (ADX), as they show fresh uptick. But on the way up, the contract might face hurdles at ₹2,740 and ₹2,815.

Hence, traders can buy the contract at current level of ₹2,650 and accumulate if price dips to ₹2,560. Place initial stop-loss at ₹2,450. Once the contract crosses over ₹2,740, revise the stop-loss to ₹2,650. If price moves to ₹2,815, exit 50 per cent of longs. Thereafter, shift stop-loss further up to ₹2,740 and liquidate the remaining longs at ₹2,920.


Published on November 24, 2021

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