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The price of castor seeds has been on the decline since mid-January. The futures contract on the National Commodity and Derivatives Exchange (NCDEX) fell off the resistance at ₹7,600. As bears continued to dominate, it slipped below a crucial support at ₹6,850 in the second week of February. This turned the outlook bearish and it is currently trading around ₹6,090.
The prevailing price action shows that the downward momentum remains strong. Although there is a chance the contract will see a corrective rally to ₹6,270 from the current level of ₹6,090, we expect it to resume the decline from ₹6,270, which is a resistance.
In two to three weeks, castor seed futures will most likely see their price drop to ₹5,780. This is a strong support and, therefore, a drop below this level is less likely.
Also read: India’s castor output seen 15% higher at 19.46 lakh tonnes for 2022-23
Trade strategy
One can initiate fresh short positions on castor seed futures at the current level of ₹6,090. Add more shorts if the price rises to ₹6,270. Place stop-loss at ₹6,420 at first. Modify the stop-loss to ₹6,020 when the contract falls below ₹5,900. Liquidate the shorts at ₹5,780.
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