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The price of guar seed futures on the National Commodities and Derivatives Exchange (NCDEX) was trading in the broad range of ₹5,700 and ₹6,440 since December last year. Within this range, for most of the time, it was fluctuating in the narrow range of ₹6,100 and ₹6,440.
However, last week, the contract broke out of the resistance at ₹6,440. Notably, it closed the week above this level, indicating strong upward momentum. Currently trading at around ₹6,570, the contract is able to sustain above ₹6,440 and that means, it is highly likely to witness a leg of the uptrend from here.
Although ₹6,700 can be a minor hurdle, we expect the contract to ease past this level and touch ₹7,050 within a month. Supporting the bullish bias, indicators like the RSI and the MACD are showing a fresh uptick. Moreover, the outstanding open interest (OI) of guar seed May futures have doubled to 56,140 contracts as against 28,005 contracts a week back. A price rally along with an increase in OI indicates a long build-up.
Considering the above factors, traders can initiate a fresh long position at the current level of ₹6,570. Place initial stop-loss at ₹6,270 and tighten it to ₹6,380 when the contract decisively breaks out of ₹6,700. Liquidate the longs at ₹7,050 since there can be profit-booking at this level which can drag the price lower.
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