MCX-Lead: Trend appears negative

Akhil Nallamuthu BL Research Bureau | Updated on September 14, 2020 Published on September 14, 2020

Last week, the September futures contract of lead on Multi Commodity Exchange (MCX) declined sharply and breached the key support of ₹150, potentially turning the outlook bearish, at least in the short term. It has also slipped below the 50-day moving average (DMA), making the case stronger for the bears.

While the contract has begun the week on a flat note and hovering at the 50 per cent Fibonacci retracement level of the recent rally at ₹146, it is high likely that the price could drop further.

Turning in favour of the downtrend are the relative strength index (RSI) and the moving average convergence divergence (MACD) indicators on the daily chart. The RSI dropped and has moved below the midpoint level of 50 whereas the MACD, which has been in a downward slope, has entered the bearish territory.

The contract can be expected to be bearish until the price remains below the key level of ₹150.

Going ahead, the contract will most likely fall below ₹146 and depreciate towards the support at ₹140. Subsequent support can be spotted at ₹134. On the other hand, if the contract strengthens, it will face a hurdle at ₹150. But a breach of that level can lift the price to ₹154 – the 21-DMA. But ₹150 holds the key as far the short-term trend is concerned.

On the global front, the three-month rolling forward contract of lead on London Metal Exchange (LME) has been on a decline over the past couple of weeks wherein the price has dropped below the support of $1,900. The contract is likely to witness deeper correction which can weigh on the contract in MCX.


Trading strategy

The price of the contract on MCX has breached an important support, turning the short-term outlook negative. Likewise, globally the price might be heading for some more correction. Considering these factors, traders can short the contract on rallies with stop-loss at ₹154.

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Published on September 14, 2020
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