The futures contract of guar seed on the National Commodity and Derivatives Exchange (NCDEX) is on a descent since last November on facing resistance at ₹4,400. But the contract started to move sideways from December until last week. That is, it was largely consolidating between ₹3,840 and ₹4,000.
However, since mid-February, the contract seemed to have been developing some bearish trend and consequently, April futures breached the key base of ₹3,840 last week, opening more room to move downside. The price action since November until now – a downtrend followed by a consolidation phase followed by a breakdown – is a symptom of bearish continuation.
Hence, with the breakdown, the near-term trend has turned bearish and substantiating the same, indicators such as the relative strength index and the moving average convergence divergence on the daily chart have slipped into the negative territory.
Also, the average directional index, that shows the strength of a trend, is signalling that the bears are gaining good traction. Moreover, the contract has been consistently falling off the 21-day moving average and forming lower highs and lower lows.
Traders can consider initiating fresh short positions on rallies with stop-loss at ₹3,900. The contract is likely to depreciate to ₹3,700 below which it can possibly find support at ₹3,600. So, these levels can be the near-term targets.