The sharp fall in nickel prices in the last few months has erased most of the gains it had accumulated in the first half of the year. The nickel futures contract traded on the Multi Commodity Exchange (MCX) had tumbled about 27 per cent from its peak of ₹1,280 per kg recorded in May. The contract is now up just 8 per cent for the year. Earlier, the contract had risen a whopping 48 per cent between January and May.

Indonesia, the world’s largest supplier until last year, banned raw ore exports in January.

Nickel price skyrocketed due to fear of supply disruption following this ban.

However, increased supply from the Philippines has triggered a reversal in nickel price. The Philippines has now overtaken Indonesia as the world’s largest ore supplier.

Nickel is expected to remain under pressure and there is still room left for prices to fall. This provides a good opportunity for short-term traders to initiate fresh position in the MCX-nickel futures contract.

Short-term view: The short-term outlook for the MCX-nickel futures contract is bearish. The contract is in a strong downtrend since May.

The contract recorded a low of ₹899.10 in October and witnessed a reversal from this low. This corrective rally encountered resistance at ₹990, near the 21-day moving average level, and is coming down once again. This leaves the broader downtrend intact. The 21-day moving average resistance is currently at ₹953 which is the immediate hurdle for the contract. While the contract trades below this level, a revisit of ₹900 looks likely in the short-term.

Traders with a short-term perspective can go short in this contract. Stop-loss can be placed at ₹955 for the target of ₹905. Intermediate rallies to ₹950 can be considered as a good opportunity to accumulate more short positions.

The short-term outlook will turn bullish only if the contract records a strong close above its 21-day moving average resistance. Such a break will then open doors for a rally targeting ₹975 and ₹1,000 levels.

Medium-term view: The current downtrend in the MCX-nickel futures contract, that has been in place since May, could be nearing a bottom.

The contract has a key medium-term support near ₹880 which can halt the current downtrend. A reversal from here will signal the beginning of a new leg of the uptrend that has the potential target of ₹1,000 and ₹1,100.

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

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