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Guar seed futures (continuous contract) on the National Commodity and Derivatives Exchange (NCDEX) has been on a rally for the past two months. It rebounded on the back of support at ₹5,000 and is now hovering around ₹6,325. It made a high of ₹6,623 this week.
Notably, the contract has resistance at ₹6,400 and ₹6,660. A rally beyond these levels is less likely. Since 2022, guar seed futures have fallen off the ₹6,400-6,660 price band several times, proving that the barrier is strong.
In line with this, we expect guar seed futures to see a decline from the current levels. While ₹6,100 is a minor support, the contract will most likely fall towards support at ₹5,750. A breach of this level can drag the contract lower to ₹5,500.
Alternatively, if the contract breaks out of the resistance at ₹6,660, it could see a swift rally to ₹7,150.
However, as it stands, the probability of guar seed futures seeing a fall in price is high.
Trade strategy
Short guar seed futures at the current level of ₹6,325; add more shorts if the price rises to ₹6,550. Place initial stop-loss at ₹6,800.
Alter the stop-loss to ₹6,300 when the price falls below ₹6,000. Tighten the stop-loss furter to ₹6,100 when the contract touches ₹5,900. Book profits at ₹5,800.
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