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Nickel has been tumbling continuously since September. Weak demand for stainless steel, high inventories and slow down in China are the major factors that put pressure on the metal.
The spot price of nickel on the London Metal Exchange (LME) has tanked over 35 per cent from its high of $19,824 a tonne in September to $12,825 currently. The outlook continues to remain bearish and there is room for prices to fall further in the coming days.
This offers a good opportunity for the traders to take short position in the domestic nickel futures traded on the Multi Commodity Exchange (MCX). The contract moves in tandem with the LME nickel spot prices.
Short-term view The outlook is bearish. After hovering around the 21-day moving average level since the beginning of March, the contract has declined below it decisively last week. This fall is expected to keep the contract under pressure. Resistances for the contract are at ₹835, ₹850 and ₹868 – the 21-day moving average level. An immediate fall to ₹780 is possible in the coming days. The fall can extend to ₹735 thereafter, in the short-term.
Traders can go short. Stop-loss can be placed at ₹845 for the target of ₹740. Intermediate rallies to ₹835 if seen can be considered to accumulate short positions.
The outlook will turn bullish only if the contract records a strong break and close above ₹850. Such a break can take it higher to ₹900 there after.
Medium-term view The downtrend that began in September is strong and is still intact. Key resistance is at ₹900. An immediate bounce from current levels to breach this resistance looks unlikely. As long as the contract trades below ₹900, there is a danger of the downtrend extending to ₹700 or even ₹650 in the medium-term.
Traders with a medium-term perspective can hold the short position with a wider stop-loss at ₹915 for the target of ₹665. Any corrective rallies to ₹850 and ₹900 if seen can be considered for accumulating short positions.
On the global front also, LME spot nickel price is likely to fall to $10,000 and $9,500 levels. This will keep the domestic futures also under pressure and curb them from any sharp rallies.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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