Commodity Calls

Downtrend likely to remain intact in NCDEX guarseed

Gurumurthy K BL Research Bureau | Updated on December 25, 2018 Published on December 25, 2018

Guarseed prices have been under pressure for more than a month. The prices have been falling consistently since early November.

The guarSeed futures contract on the National Commodity and Derivatives Exchange (NCDEX) made a high of ₹4,869 per quintal on November 12 and has plummeted over 14 per cent to ₹4,179 now.

Weak demand coupled with increasing supplies has dragged the prices sharply lower in the last few weeks.

Outlook bleak

The current downtrend is likely to remain intact in the coming weeks. Though there is a support near current levels at ₹4,177 — the 200-day moving average, the contract is vulnerable to decline below it.

Key resistances at ₹4,250 and ₹4,325 are likely to cap the upside in the near term. Intermediate bounce to these hurdles is likely to find fresh sellers coming into the market. A fall to ₹4,100 is likely in the near term. A bounce from ₹4,100 can trigger a corrective rally to ₹4,200 and ₹4,250. But the upside is likely to be capped. A break below ₹4,100 can target ₹4,000. A further break below ₹4,000 will then increase the likelihood of the contract tumbling towards ₹3,800 over the medium-term.

The bearish outlook will get negated if the contract breaks above ₹4,325. Such a break can take the contract higher to ₹4,400 and ₹4,450. However, the outlook will turn completely positive only if the contract breaches ₹4,450 decisively.

Trading strategy

Traders with a medium-term perspective can go short at current levels and also accumulate at ₹4,225 and ₹4,300. Stop-loss can be placed at ₹4,375 for the target of ₹3,850. Revise the stop-loss lower to ₹4,125 as soon as the contract moves down to ₹4,075.

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

Published on December 25, 2018
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