Price outlook – Uptrend in the offing
Chana prices transformed the prior consolidation into a smart recovery last week. The ability of the prices to bounce from Rs3,917 during the 1st week of June augurs well for the medium term rally towards Rs4,700 which could be sparked off once prices break the crucial barrier of Rs4,420. Historical observations show that prices have been moving within a upward sloping channel and 50% Fibonacci level acts as a strong support from where prices have turned positive. Similarly, on the upside, 200% Fibonacci level has been an ideal target level for rallies. In the current context, as long as prices hold Rs3,850-4,000, the expected uptrend shall remain intact. Broadly, fundamentals stand supportive for a couple of reasons, one, is the 7-8% yoy drop in current year crop to 17.1mn tons, two, the delay in monsoon (with 50% lesser recorded on yoy basis) which could impact the Kharif plantings as a whole. Instances such as double digit fall in Kharif sowing in certain southern states along with the prospects of a shift towards alternate lucrative crops such as soybeans keeps the production prospects at tenterhooks, while prices could attempt upside strides from the seasonal demand perspective.
Positional strategy – BUY
Can initiate long position upon closing above Rs4,350 with an initial target of Rs4,670 followed by a potential target Rs4,730. Overall stop loss can be kept at Rs4,065.
Failure to close above Rs4,350 and sustain above Rs4,420 could invite a mixed tone within Rs4,050-4,350.
Source: Metastock, India Infoline Research
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