Since breaking out of the resistance at ₹137 in early June, the July futures contract of lead on Multi Commodity Exchange (MCX) has been in an uptrend. Last week, it registered a high of ₹146.2 but then started to soften.
Currently, the contract is trading at around ₹144 and it has a support at ₹142. At this price point, the 21-day moving average (DMA) coincides, making it a strong support. The price action shows that the contract might have resumed the uptrend after a minor correction.
The daily relative strength index is showing a fresh uptick and it lies above the mid-point level of 50. Whereas the moving average convergence divergence indicator on the daily chart, though remains flat, is in the positive territory. Also, as the price is above the 21-DMA, the outlook stays bullish. Moreover, the contract is above the critical support of ₹142.
On the back of the prevailing upward bias the contract might rally from the current levels. While ₹146 can be the nearest hurdle, a breakout of this level can take the contract to ₹150. But if the contract weakens and decline below the support of ₹142, it could attract more selling interest. The immediate support below that level is ₹137. A break below that level can drag the contract to ₹132.
On the global front, the three-month rolling forward contract of lead in London Metal Exchange (LME) seems to be moving in a sideways trend. However, the price remains above the support at $1,750 and until the contract lies above that level, the likelihood of a rally is high. This can positively influence the contract in MCX.
Trade strategy
Though the contract moderated last week, the trend remains inclined to the upside. Also, the contracts on MCX and LME stays above their respective support levels. Considering this, traders can buy MCX-Lead with stop-loss at ₹140.