Following a sharp rally in late April and early May 2015, the copper futures contract traded on the Multi Commodity Exchange (MCX) encountered a significant resistance at ₹420/kg. Triggered by negative divergence, the contract changed direction and has been on a short-term downtrend since then. On May 29, the contract fell 1.5 per cent breaching its 200-day moving average at ₹395 levels. However, the contract found support at 385 this week and is now testing it. The indicators in the daily chart are trending downwards backing the short-term downtrend. A decisive fall below ₹385 will diminish the strengthen of the medium-term uptrend that has been place since January 2015 low of ₹335 levels.

Any rally will encounter resistances initially at ₹395 and then at ₹400 and ₹406 levels. Next significant resistance above ₹406 is pegged at ₹420 levels. Traders with a short-term perspective can tread with caution and initiate fresh short position if the contract breaches the current support level at ₹385. Strong fall can drag the contract down to ₹375 and then to ₹370 in the short term.

Traders with a medium-term perspective should stay on the sidelines and take short position on a decisive fall below the trend deciding level of ₹375 levels with a stop-loss at ₹390 levels. In that case the contract can trend downwards and find support at ₹360 in the medium term.

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

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