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The January futures contract of nickel on the Multi Commodity Exchange (MCX) has been on an uptrend since early October. From recording about ₹1,050, the price rallied to register a high of ₹1,333 until a a couple of weeks ago – a gain of nearly 27 per cent in a span of two and a half months.
However, since marking the high of ₹1,333, the contract has been struggling to head north. The price has been on a decline since past couple of weeks and the contract is currently trading around ₹1,250.
Looking at the prevailing price action, a lower high is formed on the daily chart and the price is trading marginally below the 21-day moving average, raising the question of a possible bearish trend reversal. Similar indications are given by the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart. The RSI has now moved down to neutral region from the bullish region and the MACD has turned its trajectory downwards.
Nevertheless, the contract has a support at ₹1,245. If this level is breached, the near-term outlook can turn bearish wherein the contract can drop to ₹1,200 – a significant base. Subsequent support is at ₹1,160.
However, until the price stays above ₹1,245, the likelihood of a fall is low despite some bearish signs. So, traders can now remain on the fence and sell the contract with stop-loss at ₹1,310 if price decisively breaches the support at ₹1,245.
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