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The silver futures contract traded on the Multi Commodity Exchange (MCX) is trading on a weak note. The contract recorded a high of ₹40,574 a kg on May 18 and has reversed lower sharply. It is currently trading near ₹38,650. Key resistances are at ₹39,200 and at ₹39,500.
As long as the contract trades below these hurdles, a further fall to ₹37,950 looks likely in the coming days.
Traders with a short-term perspective can go short with a stop-loss at ₹39,100 for the target of ₹38,000. Intermediate bounce to ₹39,000 can be used to accumulate short positions.
Though the immediate outlook is bearish, the downside is expected to be limited with a couple of key support levels ahead which can arrest the decline. The 200-day moving average support is at ₹37,950 and an important trend-line support is at ₹37,550. An upward reversal could be on the cards either from ₹37,950 or after an extended fall to ₹37,550.
Such a reversal will have the potential to take the contract higher to ₹40,000 levels once again.
On the global front, the spot silver ($16.8/ounce) is currently trading below its 200-day moving average.
A fall to $16.5 or even $16.2 looks likely in the coming week. A break below $16.2 can drag it further lower to $15.8 there after. The weak global spot price could keep the domestic futures contract also under pressure.
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