Copper futures on the Multi Commodity Exchange (MCX), after witnessing higher volatility in November, steadily gained in December until it faced resistance at ₹713. While the prices did not fall off this level, the contract started to consolidate between ₹700 and ₹713.
On Wednesday, the contract went above ₹713, and is currently hovering around ₹717. While there is high likelihood of a rally from the current level, one should note that the price level of ₹720 is a key hurdle. The battle is won only if the bulls can lift the contract above ₹720.
Such a break can lead to another leg of a rally where the contract can touch ₹760, its nearest resistance above ₹720, quickly. Subsequent resistance is at ₹800.
If the contract declines from the current level, it can find support at ₹700 and at ₹680.
Trade strategy
Even though the bias has been bullish of late and the MCX copper futures has moved above the minor hurdle at ₹713, there is a major one at ₹720. Until this is breached, it is not a good idea to take fresh long positions.
Since the momentum is with the bulls, going short on the back of the resistance at ₹720, that too without any sign of a bearish reversal, is not wise.
Considering the above, one can wait and go long after the copper futures break out of ₹720. Place initial stop-loss at ₹690. When the contract touches ₹750, tighten the stop-loss to ₹730. Exit the shorts at ₹760.