Investment Ideas

COCUD: Cake@Janta Price

CMP: Rs 1408 (As on 03rd Apr 2018)

Buy: > Rs 1430

Targets: Rs 1575-1690

Stop Loss: <Rs 1340

COCUD or Cotton Seed Oilcake, which is known as ‘Kapasia Khali’ in hindi, is a by-product of cotton seed oil. COCUD is mainly used as a cattle feed to add viscosity to the milk. The production of fresh COCUD starts after cotton arrivals end in October-November period. Thus, the peak in production is seen from November till January. We are the largest producer of COCUD in the world with annual production of around 9 million metric tons. Total production is consumed domestically and thus there is no export or import. There is no availability of fresh cotton seed oilcake during summers and due to its very short shelf life and high demand in, prices usually rise during this time period. However, prices are surprisingly lower this summer as demand has not yet picked up momentum. Therefore, we predict a strong bullish rally in next 2-3 weeks as prices have started to consolidate. Let’s see what technical charts have in store for the bulls.

Prices are relentlessly falling since one year and have already seen a correction of around forty percent. Momentum indicators like RSI and MACD are into a huge positive divergence after hitting the extreme end of their respective oversold areas. Positive crossovers in both these indicators are providing a clue that prices are very close to the end of the current bearish trend. ADX has also reached its peak of negative movement and is now looking set to divert its energy towards a big turnaround in positive direction. Prices have been treading below a key moving average band since a long time BUT we may see a shift in this positioning very soon. A constant fall in volume & open interest along with prices is also the trigger point for a bullish reversal. Most important point to remember apart from technical and fundamental views is that unlike other agro commodities with huge lots and margins, COCUD comes at a ‘Janta Price’ as it has a relatively very small lot that naturally attracts a low margin. Profitability with affordability-what a combination!

We recommend buying in COCUD May contract above Rs 1430 for targets in the range of Rs 1575-1690. Maintain stop loss below Rs 1340.

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