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We consider the turmeric generic Q6 future price traded on the National Commodity and Derivatives Exchange (NCDEX) for this technical analysis. The contract size is 10 tonnes and the tick value is Rs 100. It closed at Rs 7,220 a quintal on Friday.
Turmeric futures bottomed out in late 2007 between Rs 1,800 and Rs 2,000. Since then, it was on a long-term bull run until it faced resistance around Rs 16,000 levels in May 2010. After consistently testing this resistance level, the commodity reversed lower in early December 2010 after registering a high of Rs 16,350.
In late December, the commodity plunged sharply. It has been on a medium-term downtrend since then. The commodity has retraced 61.8 per cent Fibonacci retracement level of its prior bull run and is currently testing a key long-term support between Rs 7,150 and Rs 7,300.
An emphatic fall below Rs 7,150 can drag turmeric futures to Rs 6,000 and then to Rs 5,000-5,200 in the long term. On the other hand, a reversal from the current support band can lead to a corrective rally initially and lift the commodity higher to Rs 9,070 and then to Rs 10,000 levels. The weekly relative strength index is hovering in the oversold levels, below 30 levels mark, signalling possibility of a trend reversal.
Further, weekly moving average convergence divergence (MACD) indicator is also featuring in the deep oversold levels denoting the possibility of a pull-back rally. Only a strong up-move above Rs 7,300 will signal resumption of the long-term uptrend and take it higher to Rs 14,000 and Rs 16,000 in the longer term.
Medium-term trend
Turmeric has been on a medium-term downtrend since it faced resistance at Rs 16,000 in early December 2010. The daily relative strength index and daily price rate of change indicator are displaying positive divergence signalling possibility of trend reversal. Moreover, daily MACD is hovering in the oversold levels. A rebound from the current support zone can take turmeric higher to Rs 8,354 levels and then to Rs 9,230 levels in the medium term. Nevertheless, a strong close below Rs 7,150 levels will pull the commodity down following a small pause around Rs 6,350 levels to Rs 6,000.
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