The nickel futures contract traded on the Multi Commodity Exchange (MCX) has tumbled over 10 per cent in last two weeks. This fall has strengthened the contract’s overall downtrend

Nickel price has been under pressure due to weak global demand, especially from China, the world’s largest consumer of the metal. The slow down in China has reduced the demand in its steel sector where nickel is used as an input for manufacturing. Slack demand has in turn increased the inventory which is also adding pressure to the price.

On the global front, the spot nickel price on the London Metal Exchange has tanked 12 per cent from the high of $14,415 a tonne recorded in the first week of May to $12,664 . The outlook is bearish with key resistance at $13,460. A fall to test $12,000 is possible in the coming weeks. A break below ₹12,000 can drag the price further lower to $11,500 or even lower. Such a fall in the global spot price could keep the domestic futures contract also pressured. The MCX Nickel futures contract moves in tandem with the global price. It offers a good opportunity for traders to take short position in the contract.

Short-term view: The contract has been trading in a broad sideways range between ₹765 and ₹930 a kg since March. Within this range a high of ₹932 was recorded early this month and the contract reversed sharply lower from there. The short-term range bound movement remains intact. There is a strong likelihood for the contract to move lower to ₹765 – the lower end of the range in the coming weeks.

Traders with a short-term perspective can go short. Stop-loss can be kept at ₹855 for the target of ₹770.

A breakout on either side of ₹765-₹930 range will decide the next leg of move for the contract. On the charts, the price action suggests that the contract can break the short-term range downwards below ₹765. Such a break can drag it further lower to ₹720 there after.

Medium-term view: The downtrend that has been in place since September 2014 remains intact. However, an important trend-line support is at ₹720 which can halt the downtrend. A reversal from here will see the contract rising towards ₹900 and to ₹1,000 levels there after. On the other hand, a break below ₹720 can add more pressure and drag the contract further lower to ₹600.

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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