MCX silver in sideways movement

Yoganand D BL Research Bureau | Updated on January 20, 2018 Published on May 17, 2016


After facing resistance at the key ₹42,000 per kg in early May, the silver futures contract traded on the Multi Commodity Exchange (MCX) started to trend downwards.

Last week, the contract fell 1.8 per cent to close at ₹40,974 amid volatility. The contract trades at ₹40,960, marginally down by ₹27 or 0.07 per cent on Tuesday. It has an immediate support at ₹40,500 and the next is at ₹40,000.

The short-term uptrend that started from the ₹35,500 in early April will be in place as long as the contract trades above ₹40,000 . The indicators and oscillators in the daily chart are trending downwards showing signs of weakness as well as trend reversal.

Only a conclusive fall below the key base level at ₹40,000 will confirm that the short-term trend has reversed downwards. In that scenario, the contract can decline to ₹39,000 or even to ₹38,500 in the coming trading sessions. To alter the medium-term uptrend, the contract has to tumble below the trend-deciding level of ₹38,500. Then, the contract can decline to ₹37,500 and then to ₹37,000 in the medium term.

On the upside, the contract has a significant resistance at ₹42,000 with immediate hurdle placed at ₹41,500. An emphatic breakthrough of ₹42,000 is required to strengthen the uptrend. Subsequent resistance is at ₹43,000. As the contract currently moves sideways in the range between ₹40,000 and ₹42,000, the traders with a short-term perspective should tread with caution.

On the global front, the silver spot price has been on a near-term downtrend since encountering a key resistance at $18/ounce on May 2. However, the key support at $17 is cushioning the silver price over the past one week.

Strong decline below this level can drag it down to $16.6 and then to $16-16.2 band in the short term. But, a rally above $17.5 can push the price higher to re-test the key resistance level at $18.

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

Published on May 17, 2016
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