Rapeseed-mustardseed prices have been in free fall since November 2016 owing to oversupply in the market. However, the price has shown some signs of reversal over the past month. The mustardseed futures contract, traded on the National Commodity and Derivatives Exchange (NCDEX), had slumped 22 per cent from ₹4,834 per quintal in November 2016 to record a low of ₹3,753 per quintal in February 2017. But since then, the contract has recovered 5.7 per cent and is trading at around ₹3,968 per quintal.

Outlook

The price action on the chart suggests that the contract may have bottomed out. The reversal has happened from a key long-term trend-line support at around ₹3,750. Also, the daily chart shows the formation of a double-bottom reversal pattern. The 21-day moving average is turning around and is on the verge of crossing over the 55-day moving average line. All these indicators strengthen the case that the downtrend since last November appears to have ended. This also increases the likelihood of seeing a bounce-back rally in the coming weeks.

Key supports for the contract are at ₹3,920, ₹3,870 and ₹3,835, which limits the downside risk in the short term. The immediate resistance is at ₹3,960 – the 200-week moving average. A strong break and a weekly close above this hurdle can add fuel to the momentum. Such a break can take the contract higher to ₹4,175, the 38.2 per cent Fibonacci retracement resistance level. The contract may gain further potential to target ₹4,300 or even ₹4,350 if it manages to cross the hurdle at ₹4,175 decisively.

The contract will come under renewed pressure only if it declines below ₹3,800 decisively. Such a break can drag it to ₹3,600 or perhaps even lower thereafter. However, such a sharp fall looks less probable at the moment.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading

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