Commodity call: Go long on MCX-Nickel above ₹900

Akhil Nallamuthu | Updated on April 08, 2020

The April futures contract of nickel in the Multi Commodity Exchange (MCX) breached a key resistance of ₹870 on Tuesday, increasing the likelihood of the contract extending the gain. The price has inched above the 21-day moving average. But on the upside, the price band between ₹880 and ₹900 is a resistance band. The 38.2 per cent Fibonacci retracement level at ₹895 falls within this band, making the area a significant hurdle.

Moreover, the major trend remains bearish, notwithstanding the recent breakout.

Nevertheless, the oscillators hint at a bullish bias and possibilities of a trend-reversal. The daily relative strength index (RSI) has been gradually moving upwards and is now hovering at the midpoint level of 50. If it moves above that level, the near-term trend can turn bullish. The moving average convergence divergence (MACD) indicator in the daily chart is signalling a shift in trend.

The contract, which has been moving up for the past one week, tests a resistance band between ₹880 and ₹900. If the rally stretches beyond this hurdle, the price might rise to ₹950. Above that level, the resistance is at ₹970. But if the contract begins to descend on the back of the resistance band, ₹870 will act as a support. A break below that level can possibly drag the contract to ₹850.

On the global front, the three-month rolling forward contract of nickel in the London Metal Exchange (LME) has broken out of the upper limit of the consolidation range, ie, $11,350. This means that the contract will probably advance in the coming days, positively influencing the price in MCX.

Trade strategy

There are signs of further rally in MCX-Nickel. Also, in LME, the price has broken out of a range, opening the door for strengthening.

However, the futures contract in MCX faces a hindrance. So, traders can buy the contract if the price rallies past ₹900. The stop-loss can be at ₹850.

Published on April 09, 2020

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