Contracts of cottonseed oilcake have been in a downwards spiral since hitting highs of Rs 2,791 levels in July 2016. Demand for cottonseed came down in rural areas after demonetisation in November 2016 due to major liquidity crunch.
The contracts have remained weak in the last one and a half years, and they recently made a low of Rs 1,380 in March.
CBOT soy meal contracts have seen good upside move, and are trading around $ 388 levels. Other oil seeds too are showing strength in international as well as domestic markets.
International cotton contracts also traded in the positive zone in the last one week, which is supporting domestic cotton prices. Rising cotton prices will support cottonseed oilcake prices in the domestic market.
In summer, the demand for cottonseed oilcake also rises in the rural areas, as there is no alternative available for animal feed during this time.
Cottonseed oilcake in domestic market is trading in strong support zone of Rs 1,360-1,400, which signals smart recovery in the prices in days to come.
Weekly chart of Cottonseed oilcake
Cottonseed oilcake had formed a double-top pattern on the charts in September 2016, and then it continued its downwards movement.
Prices showed some relief rally from the low of Rs 1,890 made in October 2016 till Rs 2,300 in January 2017. From January 2017, contracts again remained depressed.
Recently, in March, cottonseed oilcake formed a double bottom pattern and took support at the lower levels.
The commodity has a strong support at Rs 1,365-1,400 zones. At present, the contracts are trading around Rs 1,417 levels. If cottonseed oilcake sustains above Rs 1,400 for three consecutive days and gives a weekly close above Rs 1,400 then it could move upward till Rs 1,585-1,695 levels.
On the downside, further fall is expected, if contract close below Rs 1,365.
Buy Cottonseed Oilcake Rs 1,415-1,380 | Stop loss below Rs 1,350 | Target Rs 1,585-1,695
(Manoj Kumar Jain is Director of Commodity and Currency at IndiaNivesh Commodities. He has 20 years of experience in financial service sector. Views expressed in this article are author’s own and do not represent those of ETMarkets.com. Readers are advised to consult their financial advisers before taking any position based on these observations)