The nickel futures contract on the Multi Commodity Exchange (MCX) rose sharply in the past week.
The contract made a low of ₹708.5 per kg on last Thursday and has surged about 8 per cent from there to the current levels of ₹764 per kg. This strong rally has taken the contract well above the key resistance level of ₹742 which was expected to cap the upside.
The decisive break above ₹742 has negated the head and shoulders reversal pattern formed on the charts.
The contract will come under pressure only if it declines below ₹742 again.
But as long as the contract sustains above ₹742, the near-term view is positive for the contract. Immediate resistance is at ₹767. A break above it can take the contract higher to ₹775 or ₹777 in the near-term. Inability to break above ₹777 can trigger a pull-back move to ₹763.
But if it manages to breach ₹777, the current upmove can extend to the next crucial resistance level of ₹785. Short-term traders with a high-risk appetite can go long on dips at ₹758 and accumulate at ₹754.
Stop-loss can be placed at ₹748 for the target of ₹775. Revise the stop-loss higher to ₹763 as soon as the contract moves up to ₹770.
As mentioned above, the outlook for the contract will turn negative only if it declines below ₹742 again. Such a break can pull it to ₹734 initially.
Further break below ₹734 will increase the likelihood of the fall extending to ₹720 or even to ₹700 levels.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.