The futures contract of guar seed on the National Commodity and Derivatives Exchange (NCDEX) was on an uptrend between May and October this year. In late October, the January futures contract of guar seed registered a high of ₹4,497. However, the trend reversedand the contract registering a low of ₹3,853 in early December.
Going forward, the contract is less likely to break extend the decline because, the price area between ₹3,840 and ₹3,875 is a strong support band. Interestingly, the futures price has managed to stay above these levels since August. Supporting the bullish bias, the daily relative strength index has been moving up since past couple of weeks and the moving average convergence divergence indicator on the daily chart has turned its trajectory upward.
If the contract bounces off the support band and rallies, it can face a resistance at ₹4,000, where the 38.2 per cent retracement level of prior trend coincides. A breakout of this level can intensify the rally, possibly lifting it towards ₹4,100. But the support band of ₹3,840 and ₹3,875 is key and the contract can rally from here. So, buy the contract on declines with stop-loss at ₹3,840.
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