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The lead futures contract traded on the Multi Commodity Exchange (MCX) has been falling over the last one month. The contract recorded a high of ₹118.2 on October 15 and has declined over 11 per cent from this peak.
The price of this metal has been under pressure due to weak global demand and a slow down in China. The recent weak economic data releases from China are also adding more downside pressure on the metal price.
The outlook for the MCX Lead futures contract is bearish. It offers a good opportunity for traders with a short-term perspective to initiate short positions in the contract.
Short-term view: The downtrend that has begun from the October high of ₹118.2 remains intact. The contract recorded a low of ₹103.6 on Tuesday and has bounced marginally higher. Strong resistances are at ₹107 and ₹108. The upside for the contract is expected to be capped to these resistances. Rallies to test these hurdles are likely to attract fresh selling interest in the market. A strong reversal from the ₹107-₹108 resistance zone can take the contract lower to ₹100 in the short term.
Traders with a short-term perspective can go short. Stop-loss can be kept at ₹109 for the target of ₹100. Intermediate rallies to ₹107 and ₹108 can be used to accumulate short positions.
The downside pressure will ease only if the contract records a strong break above ₹108. Such a break can take the contract higher to the next targets of ₹111 and ₹115.
Medium-term view: The medium-term trend is also down. However, the contract is nearing its crucial medium-term support at ₹99. Whether it breaks below this support or reverses higher from there will decide the next leg of move for the contract.
A decisive break below ₹99 will increase the danger of the contract falling to the next targets of ₹95 or even ₹90 thereafter.
On the other hand, a strong bounce from ₹99 will ease the downside pressure. It will then increase the possibility of a corrective rally to ₹107 and ₹110.
Note: Price as of 6pm on Tuesday. The recommendations are based on technical analysis. There is a risk of loss in trading.
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