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MCX silver futures contract hit a record high of ₹59,942 in August 2013 and tumbled 29 per cent from there to a low of ₹42,418 in December.
Since then the contract has consolidated sideways between ₹42,418 and ₹45,850 until the second week of February. All through this consolidation phase, the 200-day moving average, currently at ₹45,964 has served as ceiling, thwarting any uptrend.
However, the contract then witnessed a positive break out of this range, rising above the 200-day moving average. The pull back from the high of ₹48,343 has taken support from the 200-day moving average and the contract is moving higher once again. Also, there is a bullish cross over of the 21-day moving average with the 200-day moving average.
These technical indications have made the short-term outlook positive, offering a good trading opportunity in the MCX-silver futures contract.
Short-term view: Key supports are at ₹45,964 and ₹45,430. Short-term traders can initiate fresh long position now with a stop-loss at ₹45,380.
The targets are ₹50,300 and ₹51,100.
Immediate resistance is at ₹48,343. A breach of this resistance can take the contract to ₹50,300 and ₹51,180, the 50 per cent Fibonacci retracement level. Intermediate declines to ₹46,000 can be considered for accumulating more long positions.
The bullish outlook will get negated only on a strong decline below ₹45,430. But given the fact that the contract formed a strong base in the ₹42,418-45,850 zone, the probability of such a fall is less now.
Medium-term view: The medium-term outlook is also bullish. Key medium-term support is at ₹42,000.
As long as the contract trades above this support, it can rise in the coming months targeting ₹55,500 and ₹57,000 in the medium-term.
Investors with a medium-term perspective can go long with a wide stop-loss at ₹41,500 for the targets of ₹55,500 and ₹57,000.
The level of ₹57,000 is a crucial medium-term resistance which has to be breached for the long-term outlook to turn really bullish.
Failure to break ₹57,000 could keep the contract in a broad sideways range of ₹42,000 and ₹57,000.
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