The lead futures contract traded on the Multi Commodity Exchange (MCX) has tumbled over 4 per cent from last Thursday’s high of ₹111.4/kg. Weak global demand and the slowdown in China have kept the price under pressure for most part of this year. Sharp fall in demand due to decline in electric motorbikes and auto sales in China has been one of the major triggers for the fall in lead price this year.

The outlook for the MCX Lead futures contract is bearish. The downtrend can extend further in the coming days. It offers a good opportunity for the traders to enter short position in this contract.

Short-term view The contract was range-bound between ₹107 and ₹115 for more than a month. The contract’s sharp 2 per cent fall on Monday has broken this range on the downside.

It has turned the short-term outlook bearish. Key resistance is in ₹107-108 zone. Intermediate bounce to this resistance level could attract fresh sellers coming into the market. A fall to ₹100-99 band looks likely now.

Traders with a short-term perspective can go short. Stop-loss can be kept at ₹109.5 for the target of ₹100. Intermediate bounce to ₹108 can be used to accumulate short position.

The 21-day and 21-week moving averages at ₹111 and ₹113 respectively are the important resistance levels to watch. Only a strong break above these hurdles will ease the downside pressure and turn the outlook positive for the contract.

Medium-term view The downtrend that has been in place since May this year remains intact. The price action since July suggests the formation of a triangle pattern which is a continuation pattern. The decisive fall below ₹108 this week confirms the triangle pattern breakout and signals the resumption of the overall downtrend. Significant support is in ₹100-99 zone. A strong break below ₹99 can drag the contract lower to ₹96 – the target level of the triangle pattern. Further break below ₹96 can take the contract lower to the next targets of ₹92 and ₹90 thereafter.

Key resistances for the contract are at ₹115 and ₹120. The downside pressure will ease and signs of a trend reversal will emerge if the contract records a strong break and a decisive close above ₹115. However, the medium-term outlook will turn bullish only on a strong move past above ₹120/kg.

Note: Price as of 6pm on Tuesday. The recommendations are based on technical analysis. There is a risk of loss in trading.

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