The lead futures contract on the Multi Commodity Exchange (MCX) tumbled 6 per cent on Tuesday. This sharp fall dragged the contract below its key trend-line as well as the 200-day moving average supports at ₹143 a kg and ₹142 respectively.

The contract, however, has bounced back from its low of ₹136.3 and is currently trading at around ₹140. This reversal move lacks strength. Also, the ₹142-143 region can act as a strong resistance now.

It may restrict the contract’s upside in the near term. Though a test of this resistance region is likely in the near term, a break above it is less likely as fresh sellers may emerge.

A subsequent reversal from the ₹142-143 resistance region can take the contract lower to ₹135 in the coming days. The level of ₹135 is a crucial support for the contract. The 55-week moving average and a trend-line support are poised around this level. Whether the contract reverses higher from this support or not will determine the next trend.

Upward reversal

An upward reversal from ₹135 may ease the downside pressure and increase the likelihood of a bounceback rally to ₹143 and ₹145. But a strong break below ₹135 will increase the selling pressure and drag the MCX lead futures contract lower to ₹130 or even lower levels thereafter.

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

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