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The silver futures contract extended its fall by about a per cent in the past week. Though the contract still remains in a downtrend, the pace of the fall over the past week seems to be losing momentum. Also the contract is finding support near ₹41,900 a kg level. Given the fact that the contract has dropped sharply in a short span of time, the probability is now high for a corrective rally.
On the global front as well, the spot silver price ($19.5) is bouncing from an important support level of $19.3 an ounce. The probability is now high for it to rise in the coming days to test its 200-day moving average level near $20.1. This can push the MCX-silver contract also higher.
Having said this, while the MCX-silver trades above ₹41,900, a corrective bounce to test the 21-week moving average resistance at ₹42,800 looks likely in the coming week. A reversal from here can take the contract lower again to ₹41,900. Traders with a short-term perspective can go short on this reversal at ₹42,700. Stop-loss can be placed at ₹43,250 for the target of ₹41,950.
A strong break below ₹41,900 can drag it further lower to ₹41,200 thereafter. It will also keep alive the danger of revisiting ₹40,000 level over the medium-term.
The corrective rally can extend further if the MCX-silver futures contract breaches ₹42,800 decisively. Such a break can take the contract higher to ₹43,200.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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