The MCX-silver futures contract is stuck in a narrow range of ₹44,000 and ₹44,800 over the last one week.

The 21-day moving average near ₹44,800/kg is resisting the rally for more than a week. Also, the price action since July 25 on the daily chart is suggesting a bearish rounding formation. This could keep the contract under pressure. Support for the contract is at ₹43,750 – the 38.2 per cent Fibonacci retracement level. A break below this level can trigger a fall to ₹42,932 which is the 50 per cent Fibonacci retracement support level.

This break will also result in the formation of a complex head and shoulder pattern on the chart. Traders with a short-term perspective can initiate fresh short position now.

Stop-loss can be kept at ₹45,100 for the target of ₹42,950.

If the contract reverses higher from ₹43,750, it can rise to test ₹44,320 – the 200 day moving average level and then ₹44,800. Such rallies if seen can be considered as an opportunity to accumulate more short positions.

The outlook for MCX-silver will turn bullish only if it records a strong close ₹44,800. Such a break will then open the doors for a rally to ₹46,000.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

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