MCX-Lead: In a sideways move with negative bias

Yoganand D BL Research Bureau | Updated on September 21, 2020

The September futures contract of lead on Multi Commodity Exchange of India (MCX) has been in a short term downtrend since recording a high of ₹159 in mid-August. While trending down, the contract had decisively breached a key support at ₹150 in the second week of September. This fall has strengthened the downtrend. Thereafter the ₹150 level had turned into a vital resistance and limited the upside. On Monday, the contract fell about 0.5 per cent to ₹147.7 levels. The near-term stance has turned bearish. The contract hovers well below the 21-day moving average (DMA). Over the past one week, the contract has been moving in a sideways range in the band between ₹145 and ₹150 with a negative bias. It continues to hover at the 50 per cent Fibonacci retracement level of the recent rally at ₹146.

The relative strength index (RSI) and the moving average convergence divergence (MACD) indicators on the daily chart are hovering flat as the contract moves sideways. As long as the contract trades below the vital resistance level of ₹150, the near-term outlook will remain bearish. If the contract declines below the immediate support level of ₹145 can drag the contract down to the next crucial support level of ₹140. Support thereafter is placed at ₹134. Conversely, if the contract breaks above the key barrier at ₹150 will reinforce the bullish momentum and push the contract northwards to ₹154 and then to ₹158 in the short term.

On the global front, the three-month rolling forward contract of lead on London Metal Exchange (LME) has been on a short-term downtrend since encountering resistance at $1,994 in mid-August. Recently, the contract is slipped below the key support at $1,900. This level is acting as a key resistance now. A downward reversal from this resistance can pull the contract down to $1,850.



Trading strategy

The price of the contract on MCX has been in a sideways move over the past one week with a negative bias. Hence, traders can short the contract on rallies with stop-loss at ₹151. A decisive decline below ₹145 can drag the contract down to ₹140.

Published on September 21, 2020

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