08/07/2015 (Hindu Business Line) - Crude Palm Oil price has tumbled about 7 per cent in just one month. Increase in supply at a time when the demand had remained subdued had kept the commodity price under pressure.

The CPO futures contract traded on the Multi Commodity Exchange (MCX) recorded a high of ₹468.80 per 10 kg on June 1 and has tumbled to the current levels of ₹435, a 7 per cent fall.

The trend is down and there is room left for the contract to extend its fall in the coming days as well. This offers a good opportunity for the traders to take short positions in this contract.

Short-term view: The contract has series of resistances in the band between ₹448 and₹452.

An immediate break above this resistance zone looks less probable. Also any intermediate bounce to these hurdles is likely to attract fresh selling interest entering into the market.

As such the current downtrend will continue to remain intact for the contract and it can extend its fall to ₹432, ₹429 and then to ₹425 in the short term.

Traders with a short-term perspective can wait for an intermediate bounce and go short on rallies at ₹442.

Stop-loss can be kept at ₹453 for the target of ₹430.

The downside pressure will ease only if the contract records a strong break and close above ₹452.

Such a break can take the contract higher to ₹465 and ₹470 levels once again.

Medium-term view: The contract has been facing strong resistance in the ₹470-475 zone since September 2014. It has been struggling to breach this hurdle since then.

The fall below ₹445 this week has strengthened the downside pressure.

This decline also suggests a bearish break of a triangle pattern on the chart.

Therefore, there is a high risk for the contract to fall to ₹400 or may be even lower levels in the medium term.

Traders with a medium-term perspective can initiate fresh short positions at current levels. Stop-loss can be kept at ₹460 for the target of ₹400.

Intermediate rallies to ₹445 and ₹450 can be used to accumulate short positions.

The downtrend will reverse only if the contract records a strong break and a decisive weekly close above ₹475.

The ensuing target on such a break will be ₹500.

Note: Price as of 5PM on Tuesday. The recommendations are based on technical analysis. There is a risk of loss in trading.