Break above Rs 2,050 to trigger a bigger rally in cotton seed oil cake
Global ending stock remains at 73.19 million bales against 80.45 million bales last year.
Commodity Summary MCX
These are signs of strong buying signal in the near term.
Cotton seed oil cake is a byproduct of cotton which is essentially grown for its fibre, which is used the world over to make textile. Cotton fibre is one of the most important textile fibres, accounting for around 35 per cent of the world's total textile fibres used. India is one of the main growers of cotton in the world and its arrival in mandies starts in October till the end of February.
According to the latest USDA report, global cotton production in crop year 2018-19 will be around 118.74 million bales against the production of 123.70 million bales last year.
Global ending stock remains at 73.19 million bales against 80.45 million bales last year. Indian production for crop year 2018-19 remains at 27.50 million bales as against 29 million bales in the previous year. Indian end stock will stay at 8.08 million bales against the stock of 8.68 million bales earlier.
As per CCI estimates, production may be lower by 10 per cent from previous years. Accordingly, availability of cotton seed will be lower. Lower availability of cotton seed will impact production of cotton seed oil cake. Growing export demand of other meals from Iran and Thailand will also support cotton seed oil cake prices in India. We expect cotton seed oil cake to continue its bullish momentum and gain further in coming days.
Technical chart of Cotton seed oil cake
COCUD (COTTON SEED OIL CAKE) witnessed 3.51 per cent gain last week and settled at Rs 1,978 compared to its previous week close of Rs 1,911. Recently, it has crossed eight-week consolidation resistance and formed a long bullish candle stick on the weekly chart, both of which are indicating strong buying signal in the near term.
Further, Rs 2,050 will act as decisive resistance, which coincides with 61.8 per cent Fibonacci projection line and a break above Rs 2,050 on closing basis would confirm the upside rally towards Rs 2,250 and above.
On the downside, a crucial support is seen at Rs 1,880. Any break and continuity below will only open the door to next downside move towards Rs 1,750 and below, but those chances are remote.
Recommendation: Buy COCUD above Rs 2,050 Target Rs 2,250-2,300. Stop loss below Rs 1,910 (on closing basis)