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Turmeric prices, which were beaten down strongly since the beginning of the year, has been witnessing a recovery since September.
The turmeric futures contract traded on the National Commodity and Derivatives Exchange (NCDEX) made a low of ₹6,482 a quintal in September and has reversed higher from there. The contract has surged 13 per cent from this low and is currently trading at ₹7,300/quintal.
A strong surge in demand for the commodity during the festival season has aided the prices to recover in the last several weeks.
Does the recent recovery rally mark the beginning of a fresh uptrend? Here were take a look at what the charts say.
Short-term view: The short-term trend is up. Though the contract has come off from its high of ₹7,466 on Wednesday, key supports may limit the downside in the near term. The 21-day moving average support at around ₹7,150 has been providing strong support for the contract over the last couple of weeks.
The next strong support is at ₹7,100. As long as the contract trades above these supports, a rise to ₹7,600 looks likely in the coming days. A strong break above 7,600 can take the contract further higher to ₹7,650 or even ₹7,700.
Traders with a short-term perspective can go long. Stop-loss can be placed at ₹7,120 for the target of ₹7,630. Revise the stop-loss higher to ₹7,350 as soon as the contract moves up to ₹7,420.
The short-term outlook will turn negative only on a sharp fall below ₹7,100. Such a fall may target ₹7,000 or even lower levels thereafter.
Medium-term view: The reversal from the September low of ₹6,482 has happened at a key long-term trend line support. This increases the likelihood that the downtrend that has been in place since December 2015 might have come to an end. Key resistance is at ₹7,700 which has to be breached to confirm that the downtrend has ended. Such a break can take the turmeric futures contract higher to ₹8,100 over the medium-term.
On the other hand, if the contract fails to break above ₹7,700 and reverses lower, a corrective fall to ₹7,000 is possible.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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