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Copper, one of the best performing commodities last year, continued to gain in 2021. However, since May, the metal has started to show signs of weakness. As a result, the continuous futures contract of copper on the Multi Commodity Exchange (MCX) has been on a downswing since mid-May after peaking at ₹812.
Although the year-to-date performance is still positive, the contract, currently hovering around ₹715, has corrected to 38.2 per cent Fibonacci retracement level of the prior rally.
Looking at the price action on the daily chart, the futures has been registering lower highs and lower lows for the past couple of months. Notably though, a month ago, the contract made a low of ₹690 and recovered slightly. Nevertheless, it was unable to rally past the ₹736 resistance mark.
It is largely fluctuating between ₹715 and ₹736. Though the price action appears flat, the bias is bearish until the contract remains below the resistance at ₹736.
Bearish inclination is also shown by indicators such as the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart. While the RSI lies in the negative zone, the MACD is on the verge of turning its trajectory to the downside.
Also, prolonged consolidation below ₹736 will increase the likelihood of bears taking control. Hence, traders can be bearish and short the copper futures with stop-loss at ₹736. It is likely to go below ₹700 and touch ₹675 in the near-term.
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