Stocks

MCX-Nickel: Trend is bearish

Akhil Nallamuthu BL Research Bureau | Updated on September 23, 2020 Published on September 23, 2020

The October futures contract of nickel on Multi Commodity Exchange (MCX), which has been in an uptrend since June, registered a high of ₹1,165.3 in the first week of September. But then the contract reversed the trend and fell sharply to register a low of ₹1,056.7 on Monday, before recovering marginally to the current level of ₹1,065.

Since the contract broke below the key support of ₹1,100, the short-term trend will be inclined to bearish.

Following the decline in price over the past couple of weeks, the daily relative strength index fell and slipped below the midpoint level of 50 and shows good bearish momentum. The moving average convergence divergence indicator on the daily chart, which is tracing a downward trajectory, has now entered the negative territory. Also, the contract is forming lower lows – a bearish indication.

The contract, currently hovering around ₹1,065, is likely to descend further towards the support level of ₹1,050. If price breaches that level, it will most likely test the psychological level of ₹1,000. A break below that level can intensify the sell-off. But if the contract strengthens, it can face hindrance at ₹1,100, where the 50-day moving average coincides. A breach of ₹1,100 can lift the contract to ₹1,135.

On the global front, the three-month rolling forward contract of nickel on London Metal Exchange saw its price go below the critical support of $15,000. Thus, the contract looks bearish and it is likely to drop further. A decline in price can negatively impact the contract on MCX.

 

 

Trading strategy

The contract on MCX, that breached the support level of ₹1,100 last week, exhibits a price action with negative bias. But from the current levels, the contract has its nearest support at ₹1,050, which can restrict declines below it. Hence, traders can initiate fresh short positions with stop-loss at ₹1,100 if the price breaks below ₹1,050.

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Published on September 23, 2020
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