Bulls losing grip in MCX-Nickel

The July futures contract of nickel on Multi Commodity Exchange (MCX), which was on a decline since past two weeks, has been moving up after registering a low of ₹950.1 on Thursday. The price level of ₹950 is a support and since 23.6 per cent Fibonacci retracement level and the 50-day moving average coincides at that level, it can act as a strong base.

The daily Relative Strength Index (RSI), though above the midpoint level of 50, is showing signs of the uptrend losing strength; a bearish divergence can be observed. The Moving Average Convergence Divergence (MACD) indicator on the daily chart is on a downward trajectory. Nevertheless, the contract remains above the key level of ₹950 and for confirmation of a bearish trend reversal the price should break below it.

If bears can capitalise on the weakness shown by the bulls and drag the contract below ₹950, the near-term outlook will turn bearish. Below ₹950, the support level can be spotted at ₹925 – the 38.2 per cent Fibonacci retracement level. Subsequent support is at ₹900. However, if the bulls regain traction and the contract advances, ₹1,000 will act as a considerable hurdle. A breakout of this level can lift the contract to ₹1,025.

On the global front, the price of three-month rolling forward contract of nickel on London Metal Exchange (LME) rallied after taking support at $12,430 last week. But hovering at $12,800, the contract lies below the critical level of $13,000. Notably, the contract is largely consolidating and the next leg of trend cannot be confirmed until either $12,430 or $13,000 is breached.

Trade Strategy:

The contracts on MCX and LME, which have been in an uptrend, seems to be struggling to extend the rally. Both the contracts, despite showing signs of weakness, are trading above their respective support levels. Hence, traders can short MCX-Nickel with stop-loss at ₹985 if price breaches the support of ₹950.