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Mushy tops

I noticed the other day one of my Lemon Drops top is getting mushy -- it is still green and leaves are droopy its a seedling approx 3-4 inches high ... it was on its third set of leaves wehn I noticed it.... I thought it was getting root bound and the roots were starting to grow out from the little netted tray in the germination "dome" -- so I transplanted it in a larger cup and in soil... should I remove/cut the upper portion of the plant where it is rotting? Im stumped its just the upper portion.
 
From my limited experience, I would say leave them alone as long as they are green. I have noticed that some of my plants did this also. Once I transplanted, they all seemed to perk up. But, this droopiness could also be brought on by too much or too little water. Too high of humidity or too high of temps.
 
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