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Mustard futures traded on the NCDEX have reversed sharply this week. The contract has been going through a strong uptrend since mid-August. Tight supplies and strong spot market demand had pushed prices 9.5 per cent higher since August. The uptrend remains intact and further rise in prices looks likely. This leaves a good opportunity for short-term traders to enter long positions in the contract.
NCDEX mustard futures contract have been range-bound between ₹3,780 and ₹3,940 a quintal over the last three weeks. The bias within this range is bullish. The reversal from the high of ₹3,937 recorded on November 25 halted at ₹3,840 on Monday. However, the contract has reversed up sharply from this low with strong momentum. This reversal is very significant as it has happened from a key support level of ₹3,840 which is both the 21-day moving average as well as a trend-line support level. There is a strong likelihood of the contract breaching the range resistance at ₹3,940 in the coming days. Such a break can take it higher to ₹3,960 immediately which is the 61.8 per cent Fibonacci retracement level. A strong break above this hurdle will then take the contract further to ₹4,000.
Traders with a short-term perspective can go long at current levels. Stop-loss can be placed at ₹3,830 for the target of ₹3,990.
The short-term outlook will turn bearish for the contract if it closes strongly below the 21-day moving average support level which is ₹3,840. In such a scenario, the contract can fall to ₹3,770. The medium-term outlook is also bullish. The contract has key support at ₹3,650. The downside is expected to limited to this level if an intermediate pull back is seen. As long as the contract trades above this support level, a rally to ₹4,100 looks likely in the medium term.
The medium-term view will turn negative only if the contract declines below ₹3,650. The next target will be ₹3,500 – the 200-week moving average support level or even ₹3,450 – a key medium-term trend line support level.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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