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The price of guar seed has been declining since mid-January. Extending the downswing, the futures on the National Commodity and Derivatives Exchange (NCDEX) breached a key support, turning the outlook bearish.
Since the liquidity in the April contract appears better, we are not considering the continuous contract, which is the March series until its expiry on March 20.
The April guar seed futures slipped below the support at ₹5,700 last week and the contract even witnessed a weekly close below this support. Thus, the probability of further depreciation is high. From the current level of ₹5,630, the nearest notable support is at ₹5,350.
But before seeing the next price swing southwards, the contract might inch up to the price band of ₹5,700-5,780.
So, we expect the contract to see a minor rally to ₹5,750 and then resume the downtrend towards ₹5,350.
Trade strategy
Short guar seed futures at the current level of ₹5,630. Add more shorts if the price rises to ₹5,750. Place stop-loss at ₹5,860.
Alter the stop-loss to ₹5,620 when the price falls below ₹5,500. Further tighten it to ₹5,500 when the contract touches ₹5,400. Book profits at ₹5,350.
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