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The September futures contract of nickel on Multi Commodity Exchange (MCX), which has been in an uptrend since June, registered a fresh high of ₹1,158.4 last week. But the contract began to fall from that level and it is currently hovering around the ₹1,100.
Following the price correction, the daily relative strength index (RSI) declined and slipped below the midpoint level of 50. Similarly, the moving average convergence divergence (MACD) indicator in the daily chart has been in a downward trajectory. So, both RSI and MACD is indicating a bearish bias. But the contract is now trading around the important level of ₹1,100 and right below this level is the support of ₹1,072. The 50-day moving average coincides here. Pay attention to this level because a breach of this level can turn the outlook negative.
Assuming that the contract weakens and breaks below the support level of ₹1,072, it might witness a quick fall to ₹1,040. Support below that level can be spotted at the psychological level of ₹1,000. However, if the bulls regain momentum and lifts the contract, it can possibly rally towards the prior high at around ₹1,158. A breakout of that level can take the contract to ₹1,200.
On the global front, the three-month rolling forward contract of nickel on London Metal Exchange saw its price moderate from about $15,700 to $15,200. Since it remains above the key support of $15,000 there are no threats to bulls yet. As long as it stays above this, the trend will be inclined to upwards and the price is likely to appreciate from current market levels.
Trading strategy
The contract on MCX has dropped from its recent high and the indicators are showing a bearish bias. However, globally the uptrend looks intact; also, the price of MCX-Nickel is above the important support of ₹1,072. On the back of this, traders can go long in the contract in declines with stop-loss at ₹1,050.
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