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The turmeric futures contract traded on the National Commodity and Derivatives Exchange (NCDEX) advanced 3.3 per cent to close at ₹8,166 a quintal last week. This bullish momentum extended Monday as well and the contract climbed ₹162 or 2 per cent to settle at ₹8,328.
Last session, the contract advanced marginally by 0.4 per cent to trade at ₹8,364 a quintal.
After recording a multi-year high at ₹10,660, the contract reversed direction in December 2015. Since then, the contract has been on an intermediate-term downtrend.
However, in late January 2016 the contract found support in the band between ₹7,800 and ₹8,000. This base zone also provided support in late May and early June.
Subsequently, the contract changed direction last week, triggered by positive divergence in the daily moving average convergence divergence and price rate of change indicators.
The contract is in a near-term uptrend. It has breached an immediate resistance at ₹8,100. This reversal in trend provides good opportunity for traders with a short to medium-term perspective to long in the contract.
Short-term view: The contract took support at the significant base zone between ₹7,800 and ₹8,000 in early June and started to trend upwards. It has breached 21 and 50-day moving averages while trending up and now trades well above them.
The daily price rate of change indicator is featuring in the positive terrain implying buying interest.
The relative strength index in the daily chart is on the brink of entering the bullish zone from the neutral region. The short-term outlook is bullish for the contract.
Traders with a short-term view can buy with a stop-loss at ₹8,050. The targets are ₹8,500 and ₹8,650 levels.
Medium-term view: The contract’s intermediate-term downtrend appears to have come to an end in early June. Last week, the contract breached the down trend-line and continued to move up.
An emphatic breakthrough of ₹8,650 will strengthen the uptrend and take the contract higher to ₹8,750 in the medium term. Next key resistances are at ₹8,825 and ₹9,000.
On the other hand, a decisive fall below the immediate support zone between ₹7,800 and ₹8,000 will alter the positive outlook and drag the contract down to ₹7,600 levels.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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