The price of guar seed has been on a decline since early April. Consequently, the continuous contract of guar seed futures on the National Commodities and Derivatives Exchange (NCDEX) started to decline from about ₹6,700.

As the downtrend extended, the contract breached a key support at ₹5,500 a week ago. It has been trading below this level since then. This has turned the near-term outlook bearish for the contract and as a result more decline is highly likely.

Although ₹5,000 can offer some support, given the current momentum, the contract is expected to decline to ₹4,700– nearest notable support– in two-three months. Subsequent support is at ₹4,570.

Nevertheless, the contract might retest the support-turned-resistance level of ₹5,500 before falling below ₹5,000. So, traders can plan the trades accordingly.

Based on our analysis, we recommend initiating fresh short positions at the current level of ₹5,230 and add more short positions when the futures move up to ₹5,400. Initial stop-loss can be placed at ₹5,600. Revise this down to ₹5,300 when the contract decisively falls below ₹5,000.

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When price touches ₹4,700 liquidate 80 per cent of the total shorts and tighten the stop-loss to ₹4,900. Exit the leftover short positions at ₹4,570.

There are high chances for a corrective rally after the contract falls to ₹4,570. Such a rally can lift back the contract to ₹5,000.

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