Commodity Analysis

MCX-Nickel gears up for a bullish breakout

K Gurumurthy | Updated on October 10, 2018 Published on October 10, 2018

The 21-day moving average is on the verge of crossing over the 200-day moving average.

Nickel futures contract on the Multi Commodity Exchange (MCX) has reversed higher after falling in the initial part of last week. The contract fell toa low of ₹911.7 per kg on Friday last week and managed to recover. The contract surged to a high of ₹963.3 on Tuesday but has come-off slightly from there to the current levels of ₹957 per kg.

A key resistance is at ₹968 which is likely to be tested in the coming days. This resistance has been capping the upside in the contract since July. However, the indicators and the price action on the chart suggest that the contract is likely to breach this hurdle.

Strong bounce back in the past week indicates that the contract is getting fresh buyers around the psychological level of ₹900. The 21-day moving average is on the verge of crossing over the 200-day moving average. These are positive signals indicating that the downside could be limited. It also leaves the possibility high of the contract breaking above ₹968 in the coming days.

Such a break will take the contract higher to ₹990. Further break above ₹990 will then increase the possibility of the rally extending to ₹1,020 and ₹1,050 levels over the medium term. On the other hand, if the contract fails to break above ₹968, a pull back to ₹920 or even lower levels is possible.

In such a scenario, a range-bound move between ₹900 and ₹968 can be seen for some time. The outlook will turn negative only if the contract breaks decisively below ₹900. The next targets are ₹880 and ₹860. However, a fall breaking below ₹900 looks less probable at the moment.

Trading strategy

Medium-term traders can hold the long positions taken at ₹935 and ₹925. Retain the stop loss at ₹890. Revise the stop-loss higher to ₹955 as soon as the contract moves up to ₹975. Book profits at ₹1,025.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

Published on October 10, 2018

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