Chilli gains on short covering


The Chilli futures traded positive on short covering on Saturday. From opening itself prices started trading positive on active short covering after a huge fall. However, prices witnessed small corrections but failed to pull down the prices and futures ended the day in green.

The Chilli April futures are projected to continue the recovery on short covering on Monday. Lower level buying after a huge fall might add to the prices. However, overall sentiments of poor domestic and export demand amid increasing arrivals pressurize the prices later in the day.
Daily arrivals at spot market of Guntur are hovering around 55,000 to 80,000 bags (each bag=40Kg.).
As per news sources, export demand is likely to remain sluggish for chilli as most of the importing countries has tighten their food safety standards to zero tolerance level.
As per data released by Spices board, chilli exports during April- January 2010-11 stood around 2,00,000 tons up by 22% compared to same period last year.
As per trade sources, Chinese chilli crop has be improved by 10-15% this year from last year’s losses.
According to derivative analysis, prices are rising while volumes and open interest are falling. Market is running out of traders willing to open or hold an open long/buy.
Traders are liquidating both loosing short positions & closing winning long positions. A higher probability the market is set to retrace in price lower at some point



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