The price of nickel looks sluggish as the October month futures contract continues to move sideways. The contract is oscillating between ₹1,200 and ₹1,285, traversing across the 21-day moving average. However, there is considerable weakness in the daily relative strength index as it continues to mark lower levels; it is currently below the midpoint level of 50.
The moving average convergence divergence indicator also looks weak. This indicates that the contract price might undergo a correction. But until the key level of ₹1,200 is breached on the downside, it is not advisable to take an outright bearish view.
Under these circumstances, if the price breaks below the support band between ₹1,200 and ₹1,205, where the 23.6 per cent Fibonacci retracement level coincides, the sell-off can be substantial and the price may go down to ₹1,138. Before that, ₹1,180 could act as a minor support. On the other hand, if bulls regain traction and the contract moves past the resistance at ₹1,285, it will face a hurdle at ₹1,315. But once it crosses ₹1,315, the price could appreciate to ₹1,370.
On the global front, the three-month rolling forward contract of nickel on the London Metal Exchange has fallen below a key support level of $17,000. This has turned the short-term outlook negative with more chances for the commodity to depreciate to $16,385 levels, below which support is at $16,000.
Trading strategy
Even though MCX-Nickel price is trading in the range of ₹1,200 and ₹1,285, there are certain indications that the bull trend that has been intact since July might be coming to an end. This is also corroborated by the fact that global prices have broken below a key support, which will most likely pull down the price in the domestic market as well. Hence, traders can take a bearish view and initiate short positions on rallies with stop-loss above ₹1,285 levels.