The guarseed contract on the NCDEX encountered a key resistance at ₹3,900 a quintal in late July as well as in the previous week and started to decline.

On Tuesday, the contract extended its decline and tumbled 3.6 per cent decisively breaching its 21-day moving average and a key immediate support at ₹3,620.

This fall has breached 38.2 per cent Fibonacci retracement level of the prior uptrend that started from the June low at ₹2,979.

The uptrend is loosing its bullish momentum now.

The relative strength index in the daily and weekly chart have entered the neutral region from the bullish zone implying weakness.

Moreover, the daily price rate of change indicator has entered the negative territory indicating selling interest.

The daily moving average convergence divergence indicator has signalled a sell. Since recording a July high at 3,980, the contract has been on a short-term downtrend, forming lower troughs and peaks.

The short-term outlook is bearish for guarseed (trades at around ₹3,578).

Traders with a short-term horizon can consider selling it (Symbol-Guarseed10) at current levels while maintaining a stop-loss at ₹3,750.

The contract can extend its downtrend and test supports at ₹3,400 and then ₹3,200 in the short-term.

On the other hand, the contract has immediate resistances at ₹3,740 and then at ₹3,900.

A decisive rally beyond the first resistance can alter the bearish outlook and take the contract higher to ₹3,900 once again.

Key resistance beyond ₹3,900 is at ₹4,000.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

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