After oscillating around the 200-day moving average, currently at ₹432.6 a kg, the copper futures contract traded on the Multi Commodity Exchange has dropped below this level in the past week.

The contract, however, bounced after recording a low of ₹424.85, but failed to surpass the 200-day moving average hurdle. This keeps the MCX-copper contract under pressure.

Also the price action since Friday on the daily candlestick chart suggests that the contract can extend its fall in the coming days.

Traders with a short-term perspective can use the intermediate bounce in the contract to initiate fresh short positions at ₹429 with a stop-loss at ₹433 for the target of ₹422.

However, the medium-term view is bullish for the contract with a double bottom pattern on the weekly chart.

So the current fall could be just a corrective pull back.

The neckline support of this pattern is at ₹420. So the downside for the contract could be limited to this support level.

An upward reversal from ₹420 will be a bullish signal for the contract.

It will then provide a good buying opportunity for traders with both short- and medium-term perspectives.

Such a reversal from ₹420 will have the potential to revisit the key resistance level of ₹438 which is the 38.2 per cent Fibonacci retracement level.

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

Published on July 23, 2014