Copper futures contract traded on the Multi Commodity Exchange (MCX) gained 3 per cent in the previous week to close at ₹316 per kg.

Though this positive momentum sustained on Monday and the contract advanced 1.2 per cent, the contract encounter resistance at ₹320. Since early December 2015, the key resistance at ₹320 has been limiting the contract from trending up further. After testing this resistance level, the contract slipped and trades at around ₹314 on Wednesday.

Therefore, traders with a short-term perspective should tread with caution and consider initiating long position above ₹320 levels with a stop-loss at ₹315.

Conclusive breakthrough of ₹320 can take the contract northwards to ₹330 in the short-term. But, inability to move past ₹320 can drag the contract down to ₹310. Fall below the immediate support level of ₹310 can pull the contract lower to ₹305 or ₹300. Next key support is at ₹295.

Since September 2015 peak of ₹368, the contract has been on a medium-term downtrend. This downtrend will remain in places as long as the contract trades below ₹330 - the 50 per cent Fibonacci retracement support level of the downtrend.

The daily relative strength index has re-entered the neutral region from the bullish zone. Other indicators in the daily chart have started to decline, signalling near term weakness.

The contract can fall and test support at ₹310.

Significant resistances above ₹330 are at ₹340 and ₹350.

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

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