Guarseed prices have been on a strong surge over the last several weeks. The guarseed futures contract on the National Commodity and Derivatives Exchange (NCDEX) made a low of ₹3,494 a quintal on June 5 and had reversed sharply higher from there. The contract has skyrocketed over 27 per cent from the low of ₹3,494 and is currently trading at ₹4,447/quintal.

The strong spot market demand coupled with increasing export demand for guar gum has pushed the prices of the seeds sharply higher.

Positive signals

The current uptrend, which has been in place since June, is likely to remain intact. Indicators on the charts are also bullish. The 21-day moving average has crossed over the 55-, 100- and 200-day moving averages. This is a strong bullish signal indicating that the downside is limited, and the current uptrend is likely to continue in the coming days.

An immediate support is at ₹4,350, which is likely to limit the downside in the near term. A strong short-term support is at ₹4,200. A strong fall breaking below ₹4,200 is unlikely at the moment.

Resistance is at ₹4,560, which is likely to be tested in the near term. Inability to breach this hurdle can trigger an intermediate dip to ₹4,400 or ₹4,375. However, the overall bullish outlook will remain intact.

An eventual break above ₹4,560 will boost the bullish momentum. Such a break will then increase the likelihood of the contract rallying to ₹4,800 and ₹4,850 over the medium-term.

Trading strategy

Medium-term traders can go long at current levels and also accumulate at ₹4,385.

A stop-loss can be placed at ₹4,250 for the target of ₹4,800. Revise the stop-loss higher to ₹4,495 as soon as the contract moves up to ₹4,520.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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