Commodity Calls

Bet long on guarseed futures

Akhil Nallamuthu | | Updated on: Dec 02, 2021

Traders can go long in guarseed futures anywhere between ₹5,700 and ₹5,750 with stop-loss at ₹5,480

The continuous contract of guarseed on the National Commodity and Derivatives Exchange (NCDEX), which rallied in October, marked a fresh high of ₹7,185 towards the end of the month. However, it was unable to move beyond that level and turned its path downwards. The pace of fall was equally quick similar to how it rallied earlier.

Nevertheless, as it touched the support at ₹5,700 last week, the sell-off slowed down and over the past week, it has been hovering around this price level. Notably, ₹5,700 is a significant support and this has been preventing decline below this level since late August.

 

Also, the contract has bounced twice from ₹5,700, hinting that a breach of this level is less likely. The 50 per cent Fibonacci retracement level of the rally (between June and October) lies at ₹5,565 essentially making the price area of ₹5,565 - ₹5,700 a solid base.

Therefore, chances are high for the contract to rebound from the level and the overall trend will remain positively biased until the above-mentioned support band stays valid. A rally from here means the contract will face its first barrier at ₹6,160. Resistance above this level is at ₹6,400.

Hence, traders can go long in guarseed futures anywhere between ₹5,700 and ₹5,750 with stop-loss at ₹5,480. When the contract touches ₹6,160, liquidate three-fourth of the longs. Then revise the stop-loss to ₹5,900. Similarly, once the price crosses over ₹6,300 shift the stop-loss to ₹6,180. Exit the remaining longs at ₹6,400.

Published on December 03, 2021

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