Guar seed has seen its price drop since mid-January. The continuous futures of guar seed on the National Commodity and Derivatives Exchange (NCDEX) dropped from about ₹6,400 to the current level of ₹5,685.
Nevertheless, the price action since the final week of November shows that the contract has largely been oscillating in the broad range of ₹5,680-6,400. Notably, the price band of ₹5,630-5,680. Essentially, the contract is hovering around the bottom of the range.
Thus, the likelihood of a rally from the current level looks high. That is, guar seed futures is likely to bounce off the support region and appreciate towards the range top of ₹6,400 in two to three months.
If the support at ₹5,630 is breached, the outlook will turn negative. The support levels below ₹5,630 are at ₹5,350 and ₹5,000.
Trade strategy
Consider going long at the current level of ₹5,680 with stop-loss at ₹5,525. When the contract touches ₹6,100, tighten the stop-loss to ₹5,750. Exit the long positions at ₹6,400 as this is a resistance level against which we might witness a decline.