Soy Oil prices have been on a strong upmove since the last week of December 2018. The Refined Soy Oil futures contract on the National Commodity and Derivatives Exchange (NCDEX) made a low of ₹715.55 per 10 kg on December 26 and has reversed sharply higher from there.
The contract has surged about 6 per cent from the low and is currently trading at ₹758.
Outlook
The strong upmove from the December low of ₹715.55 is signalling that the downtrend that has been in place since early 2018 has ended. Also, the price action since November 2018 indicates the formation of a double bottom pattern formation. This is a bullish reversal pattern indicating the end of a downtrend.
All these factors leave the bias bullish for the NCDEX-Soy Oil futures contract.
Immediate resistance is in the ₹763-₹765 region, which is likely to be tested in the near term. A strong break above ₹765 will confirm that the contract has resumed its overall uptrend. Such a break will take the contract higher to ₹820.
The region around ₹820 is a crucial long-term trend resistance. Inability to breach this hurdle can trigger a pull-back move to ₹770 and ₹750 again. But if the contract manages to breach ₹820 decisively, it can gain momentum and extend its rally to ₹850 or even higher levels.
Trading strategy
Traders can go long at current levels and also accumulate on dips at ₹745 and ₹735.
A stop-loss can be placed at ₹720 for the target of ₹820. Revise the stop-loss higher to ₹775 as soon as the contract moves up to ₹790.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.