Bearish outlook for Mentha oil futures

Yoganand D BL Research Bureau | Updated on January 08, 2018 Published on January 02, 2018

The MCX Mentha oil futures contract has been in limelight over the past three trading sessions. The contract lost 3.5-4 per cent over the past three trading sessions.

Since recording an intra-day high of ₹1,816 on December 29, it has been trending down on selling pressure. This is due to speculators cutting their holdings on the back of eased demand in the spot market.

Also, the spot market is projecting a negative trend on lukewarm demand.

On Tuesday, the Mentha oil futures initially rallied to an intra-day high of ₹1,649 but selling interest triggered a sharp sell-off and the contract hit the lower circuit of 4 per cent by tumbling ₹65.7 to ₹1,578.10/kg.

Since the December 29 high of ₹1,816, the contract has nose-dived 13 per cent to the current level of ₹1,578.

The contract’s 4-per cent slump last session has conclusively breached a key support at ₹1,600 and has turned the short-term outlook further bearish. Moreover, the medium-term trend is also down for the contract since marking a high of ₹2,018 levels in early December.

The daily relative strength index has entered the bearish zone from the neutral region and the weekly RSI is hovering in the neutral region with negative bias.

Both the short as well a medium-term outlook is bearish for the contract.

Traders can go short with a stop-loss at ₹1,650. The targets are ₹1,500 and ₹1,450. Significant immediate resistances are at ₹1,600 and ₹1,700.

Only a strong rally beyond ₹1,700 will alter the short-term downtrend.

Next resistances above ₹1,700 are pegged at ₹1,810 and ₹1,880.

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

Published on January 02, 2018
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