Refined Soy Oil prices have been stuck in a sideways range over the last several weeks. The contract on the National Commodity and Derivatives Exchange (NCDEX) has been stuck in the band between ₹725 and ₹748 per 10 kg for last two months. Within this range the contract is currently trading at ₹741 per 10 kg.

The prolonged sideways consolidation gives an early signal that the downtrend that has been in place since March is coming to an end. Technical indicators also point that a trend reversal is on the cards.

A cluster of supports is poised in between ₹725 and ₹720, which has been limiting the downside. The 38.2 per cent Fibonacci retracement support and a trend-line are poised at ₹723. Another trend-line support is at around ₹720. This makes it difficult for the contract to break below ₹720 going forward.

This leaves the bias bullish. It also increases the likelihood of the contract breaking the current range above ₹748. Such a break will boost the momentum and will trigger a fresh rally to ₹760.

The bullish outlook will get negated if the NCDEX-Refined Soy Oil futures contract breaks below ₹720 decisively. Such a break can then drag it lower to ₹700 or even lower.

Trading strategy

Traders with a medium-term perspective can go long at current levels and also accumulate on dips at ₹737 and ₹733. A stop-loss can be placed at ₹715 for the target of ₹785. Revise the stop-loss higher to ₹748 as soon as the contract moves up to ₹758.

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

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