Stocks

MCX-Nickel tests a key support

BL Research Bureau | Updated on July 22, 2020 Published on July 23, 2020

MCX-Nickel (₹1,010)

The August futures contract of nickel on Multi Commodity Exchange (MCX), which has been rallying since April, had recorded a high of ₹1,041.4 last week. But it started to decline from that level and price moderated to the psychological level of ₹1,000. This level is crucial as it is a strong support where the 21-day moving average coincides, meaning the short-term view depends on which side of this level the contract moves next.

Even as the overall trend appears bullish, the recent softening in price has led to some considerable changes in the price action which is reflected in the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators on the daily chart. The RSI, though above the midpoint level of 50, is indicating a loss of strength in the uptrend. Moreover, the MACD has turned the trajectory downwards.

Hence, there are clear signs of weakness . Because of the above reasons if it slips below ₹1,000, it might witness considerable sell-off. While ₹965 can be the immediate support, a break below that level can pull the price down to ₹900. On the other hand, if the contract rises by taking support at ₹1,000, it is likely to retest the previous high. Above that level, it can rally to ₹1,100.

On the global front, the price of three-month rolling forward contract of nickel on London Metal Exchange (LME) declined last week. But it has a support at $13,000 and until it stays above that level, a bearish reversal cannot be confirmed.

Trade Strategy

Though the price action of the contract on MCX hints at a possible downtrend, it has a solid support of ₹1,000. Also, the contract on LME remains above the support of $13,000. Considering these factors, traders can sell MCX-Nickel if it breaches the support of ₹1,000. Stop-loss can be at ₹1,040.

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Published on July 23, 2020
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