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The silver futures contract traded on the Multi Commodity Exchange (MCX) jumped 5 per cent to settle at ₹41,068 per kg last week, decisively breaking through a key resistance at ₹40,000 . A strong rally above this resistance level indicates that the short-term downtrend in the contract has altered. Moreover, the contract has decisively breached its 21- and 50-day moving averages and hovers well above them.
With this rally, the contract appears to have resumed its medium-term uptrend that has been in place since taking support at around ₹33,300 in early January. On Monday, the contract extended its rally by gaining about 1 per cent to ₹41,447 levels. With marginal decline, the contract was trading at ₹41,370 in Tuesday. The daily and weekly relative strength indices are hovering in the bullish zone, backing the uptrend. Further, the daily as well as weekly price rate of change indicators are featuring in the positive terrain implying buying interest. There is an increase in daily volume over the past four trading sessions. Overall, the short-term outlook is bullish for the contract.
Traders with a short-term perspective can make use of dips to initiate long position while maintaining a stop-loss at ₹40,000. An emphatic breakthrough of the immediate resistance at ₹42,000 will pave way for an up move to ₹43,000 and then to ₹44,000 in the medium term. Conversely, a decisive fall below the immediate support at ₹40,000 can extend the corrective decline down to ₹39,000 and ₹38,500 in the short term. Only a strong slump below ₹38,500 will mitigate the short-term uptrend.
On the global front, the silver spot price skyrocketed 5.5 per cent in the previous week to settle at $17.3 per ounce. This up move has conclusively breached a key resistance pegged at $17 which is also a key trend-deciding level. The up move can extend to test the resistances at $17.8 and $18 in the coming week. A decisive break above $18 is needed to strengthen the uptrend further and take the silver spot price northwards to $18.5 in the medium-term. Key supports to note are placed at $17 and $16.6.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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