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The silver futures contract traded on the Multi Commodity Exchange recorded a low of ₹44,371 a kg on Wednesday last week. After reversing higher from this low, the contract has been stuck in a narrow range.
The immediate outlook is not very clear for MCX-silver.
So traders can stay out of the market for a while until a clear trading signal emerges.
The MCX-silver futures contract can trade in a broad sideways range of ₹44,000 and ₹46,000.
The contract is moving lower after testing the upper end of this range earlier this month. It is now currently poised at the midpoint of this range with a high probability of a move towards ₹44,000.
Only a strong breakout on either side of ₹44,000-46,000 will decide the next move for the contract. If the contract reverses higher from ₹44,000, short-term traders can consider going long at ₹44,100. Stop-loss can be kept at ₹43,850 for the target of ₹44,500.
On the other hand, if the contract declines below ₹44,000, the outlook will turn bearish.
The ensuing target on such a break will be ₹43,750.
However, the medium-term outlook is bearish as the contract has been trading in a bear channel since November 2013.
Key resistance is at ₹46,000 which needs to be breached in order to turn the outlook bullish.
While below ₹46,000, there is a danger of a fall to ₹42,750 or even ₹38,000.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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