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The price of guarseed, which largely ruled flat during the first half of this year, began to see an upsurge in July. As a result, the continuous futures contract of guarseed on the National Commodity and Derivatives Exchange (NCDEX) started to rally on the back of the support at ₹4,000.
However, after touching a high of ₹6,794 towards the end of August, the price started to moderate. It dropped to ₹5,680 by early September, losing about 20 per cent within a couple of weeks.
Nevertheless, ₹5,680 acted as a strong support and restricted the decline below this level. Until last week, the contract was largely oscillating within ₹5,680 and ₹6,160. On Monday, the contract broke out of ₹6,160, giving it a bullish bias. Also, the price bounce happened on the back of the 21-day moving average support which lies at around ₹5,950.
Supporting the bullish outlook, the relative strength index (RSI) has entered the positive territory and the moving average convergence divergence (MACD) on the daily chart, which has been charting a downward trajectory for the past for the past one month, is now turning upside.
Given the above factors, traders can consider going long on guarseed futures at current level of about ₹6,400 and accumulate if price drops to ₹6,160. Stop-loss can be placed at ₹5,950. On the upside, the contract has the potential to retest the previous high of ₹6,794 in the near-term, where one can exit the longs.