Technical Analysis

Accumulate guarseed if prices drop to ₹6,600

Akhil Nallamuthu | Updated on October 27, 2021

Liquidate 50 per cent when it rallies to ₹7,475

The price of the continuous contract of guarseed on the National Commodity and Derivatives Exchange (NCDEX), which saw a sharp rally in July and August, lost steam and dropped to ₹5,680 a quintal by early September. Thus, it lost about 20 per cent within a couple of weeks. But since ₹5,700 is a support, there was no decline below this level and the contract stabilised.

However, the contract started to gain good traction a couple of weeks ago and, consequently, rallied past the resistance at ₹6,200 and, importantly, on Wednesday it moved above the prior high to mark a fresh high of ₹7,017. The breakout of ₹6,794 has increased the probability of another leg of uptrend in the coming weeks.

The price action since July – a rally followed by a consolidation phase and then a breakout – is a bullish signal. This is substantiated by the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart, which are showing a fresh uptick. Hence, the contract is in a position to continue the rally towards the next potential resistance at ₹7,475. A decisive breach of this level can take the contract to ₹7,840, which is the next significant resistance. From the current levels, the nearest potential support levels are at ₹6,600 and ₹6,400.

Hence, traders can buy guarseed futures at current levels and accumulate if the price drops to ₹6,600 and place stop-loss at ₹6,350. Liquidate 50 per cent when price rallies to ₹7,475, revise the stop-loss to ₹7,000 and look for the next target at ₹7,840.

Published on October 27, 2021

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