28/05/2014 (Hindu Business Line) - The Crude Palm Oil futures contract traded on the Multi Commodity Exchange (MCX) has tumbled 15 per cent from its high of ₹619.6/10 kg recoded on March 5.

Weak spot demand in the domestic market coupled with a sharp fall in the benchmark Malaysian crude palm oil price has dragged the commodity. This fall has broken the uptrend that was in place since December 2012.

Also the contract has broken decisively its 200-day moving average, currently at ₹554.3.

The outlook is bearish and the fall can extend further in the coming days thereby leaving opportunity for traders to take short position.

Short-term view: The short-term trend is down. The fall in the MCX-crude palm oil futures contract from the high of ₹619.6 is happening within a bear channel.

The probability is now high for the price to move lower towards the channel support which is placed near ₹508. Traders with a short-term perspective can initiate fresh short position. Stop-loss can be kept at ₹537 for the target of ₹508.

Key short-term resistance for the contract is at ₹535.

Traders can add more short positions if there is an intermediate bounce in the price to test this resistance level.

Medium-term view: The medium-term outlook is also bearish. The contract has broken below the bull channel within which it was trading since August 2013. Key medium-term resistance for the contract is now at ₹550 and then at ₹560 – the 21-week moving average.

The outlook is expected to remain bearish as long as it trades below the above mentioned resistance levels. The 21-month moving average, currently at ₹501 is a key intermediate support level for the contract.

If the contract declines below this support, there is a danger of a fall to ₹460 in the medium-term.

On the other hand, a reversal from ₹501 can keep the contract in a sideways range between ₹500 and ₹600 for some time.