Commodities

Outlook is bearish for NCDEX guar seed

Gurumurthy K BL Research Bureau | Updated on March 20, 2018 Published on March 20, 2018

Guar seed prices has been under pressure since February. The Guar Seed futures contract on the National Commodity and Derivatives Exchange (NCDEX) recorded a high of ₹4,737 per quintal on February 2 and has been falling sharply since then. The contract has tumbled over 11 per cent from this high and is currently trading at ₹4,187/quintal. A weak spot market demand coupled with an increase in arrivals from the growing areas has dragged the commodity prices lower. Also, sluggish demand from the guar gum makers is adding pressure on the guar seed prices.

Outlook

The outlook for the NCDEX Guar Seed futures contract remains bearish. The price action since January on the chart indicates the formation of a head and shoulders reversal pattern which is a bearish reversal pattern. The fall below neck-line of the pattern at ₹4,200, gives an initial confirmation of this bearish reversal pattern.

The level of ₹4,200 is likely to act as a strong resistance thereafter and it can cap the upside in the contract. As such, there is a strong likelihood of the current down-move extending towards ₹4,100 – the 50 per cent Fibonacci retracement support level, in the coming days. However, a subsequent bounce-back move from ₹4,100 to ₹4,200 cannot be ruled out. Inability to breach ₹4,200 during this relief rally can continue to keep the contract under pressure. But a fall below ₹4,100 will bring renewed downside pressure on the contract. In such a scenario, the contract can tumble to ₹4,000 and ₹3,950 – the 61.8 per cent Fibonacci retracement support level over the medium-term.

The region between ₹4,300 and ₹4,350 is a crucial resistance. The outlook will turn positive only if it breaches above ₹4,350 decisively. But such a strong up-move looks less probable at the moment.

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

Published on March 20, 2018
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