The continuous contract of nickel on the Multi Commodity Exchange (MCX), which is in an uptrend since March 2020, lost momentum in October last year. Following this, the contract was trading in a range and in fact in was forming lower highs and lower lows, essentially forming a triangle pattern. After breaking out of this pattern in the second week of January 2022, the contract rallied and marked high of ₹1,845. But then, the price dropped. However, the price band of ₹1,670 - 1685 acted as a support and stopped the decline below these levels.
Notably, the contract has been showing bullish signs over the past week. Corroborating this, the cumulative open interest of all nickel futures on the MCX increased to 2,675 contracts as on Friday compared to 2,439 contracts by the end of January. Also, the price is now above an important level of ₹1,750. Therefore, one can maintain a bullish view on nickel and its futures.
On January 27, we had recommended a buy at around ₹1,716. We advised accumulating if the price drops to ₹1,640, which did not happen. Nevertheless, traders who hold longs from ₹1,716 can continue to hold. Fresh longs can be added if the contract decisively closes above ₹1,750 on Monday. While our earlier stop-loss was at ₹1,580, we suggest tightening it to ₹1,650. On the upside, when the contract touches ₹1,845, liquidate 50 per cent of the longs and then tighten the stop-loss to ₹1,750. Exit the remaining position at ₹1,900.