The continuous contract of copper on the Multi Commodity Exchange (MCX) has rallied since March last year. Even though there have been intermittent price corrections, the overall direction of the trend has remained up.
While the contract extended the rally in 2021 as well, it faced a strong resistance at ₹740 levels in February. On the back of this, the contract reversed the trend and witnessed a considerable drop in price i.e., a 12 per cent fall because of which it declined to ₹655.
However, the bears lost momentum at ₹650 levels and since this acted as a support, bulls regained momentum and resumed its move northwards. As a result, it moved past ₹740 in April and marked a new high of ₹815 by the first week of May. But notably, the contract fell back below the ₹800-mark the same day when it hit a new high.
Unable to decisively breach ₹800, the contract started to correct. Since mid-May, the contract has been making lower lows and lower highs and it has lost nearly 13 per cent from the previous high.
Thus, the short-term outlook seems weak for copper and the bearish inclination is corroborated by indicators like the relative strength index and the moving average convergence divergence on the daily chart as they remain in their respective bearish territories. Considering the prevailing price action, the contract is likely to decline further. So, traders can short July expiry copper futures with stop-loss at ₹735 for a target of ₹675.