The nickel futures contract on the Multi Commodity Exchange (MCX) fell in the past week.

The contract made a high of ₹917.8 per kg on last Thursday and has come-off from there. It has tumbled 4.7 per cent from this high and is currently trading at ₹875. The near-term view is negative. The contract can extend the downmove to test the 21-day moving average support at ₹862.

A break below ₹862 will drag the contract further lower towards the crucial ₹850-847 support region. Whether the contract manages to bounce from this support zone or not will then decide the next move.

A decisive break below ₹847 will increase the likelihood of the contract tumbling towards ₹830 or ₹825 on the back of profit booking.

On the other hand, if the contract manages to bounce from the ₹850-₹847 support zone, the downside pressure would ease.

A bounce back towards ₹900 and ₹910 is likely in such a scenario. It will also indicate the formation of an inverted head and shoulders pattern on the chart. This is a bullish continuation pattern and in this case it will mean that the uptrend is intact and could resume going forward.

A strong break above ₹920 is needed to confirm this pattern. Such a break will trigger a fresh rally towards ₹960 or even higher levels.

Traders with a medium-term perspective can go long if the contract reverses higher from the ₹850-₹847 support zone. Stop-loss can be placed at ₹815 for the target of ₹935. Revise the stop-loss higher to ₹860 as soon as the contract moves up to ₹895.

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

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