Pepper prices have been moving on an upward sloping channel since early June'12. Prices broke the upper line of the channel and are consolidating within Rs42,500-43,500 since the last 3-4 sessions. The breach of a crucial resistance level of Rs41,650 after a span of 4 months indicates strength in the trend. Prices have held this level quite well and then rallied. Similarly, global pepper prices Ex-Vietnam is trading / sustaining above the resistance level of VND1,22,000/kg after bouncing from VND1,14,000 few weeks ago. This augurs well for the domestic prices to stay firm in the short run. Successful breach of Rs43,350/43,500 would open doors for gains towards Rs44,500 and above. In the mean time, we might see a fall in the prices towards Rs42,600 levels as market is tending towards overbought territory. As long as prices are holding above Rs42,500, the above mentioned up trend remains intact. Potential target is seen as high as Rs45,100 as well.
Positional strategy – BUY
Can initiate long position upon closing above Rs43,350 with an initial target of Rs44,280 followed by a potential target Rs44,750. Overall stop loss can be kept below Rs42,500 (daily closing basis).
Failure to breach Rs43,500 could lead to break below Rs42,500 and a retest of the prior range break out level of Rs41,850/41,650.
NCDEX PEPPER AUG’12 FUTURES – Rs/Qntl
Source: Metastock, India Infoline Research
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