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Copper prices tumbled in March as China, the world’s largest consumer of the commodity, witnessed its first domestic corporate default.
Chinese companies use copper as a security to obtain loans. Following this, the copper futures contract traded on the Multi Commodity Exchange (MCX) fell 12 per cent from its high of ₹446 a kg to a low of ₹391.8 in just three weeks.
Though the MCX-Copper has recovered about 6 per cent from the low, on the charts this recovery is not reflecting any strength. Technically, the 200-week moving average – currently near ₹420 is restricting a strong rise in the contract.
Inability to breach ₹420 could keep the MCX-copper contract under pressure.
While below ₹420, there is a strong likelihood of a fresh leg of down move in the coming weeks. This fall could target ₹390.
Currently the contract is range-bound between ₹404 and ₹420 over the last few weeks. It is now on the verge of testing the upper end of this range.
Since the bias is bearish, short-term traders can initiate fresh short position at ₹418 with a stop-loss at ₹421.
The targets are ₹414 and ₹412. If the contract breaches its resistance at ₹420, it can then target ₹423.
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