BL Research Bureau

The continuous contract of copper on the Multi Commodity Exchange (MCX), which has been on a strong uptrend since March 2020, hit a high of ₹815 in May this year. However, the contract could not extend the rally beyond ₹815. Although the trend did not turn bearish, the contract has largely been moving in a broad sideways trend i.e., between ₹690 and ₹808. Within this price band, over the past few weeks, the contract has been oscillating between ₹718 and ₹755.

The contract has been advancing over the past few sessions, showing some bullish signs, and is currently hovering around the upper band of this range. Supporting the positive bias, the number of outstanding open interest (OI) of all active copper futures on the MCX has increased over the past week – it stood at 5,628 contracts as on Wednesday compared to 4,857 contracts a week ago. Thus, the rally is accompanied by increase in OIs, a bullish inclination. Nevertheless, the contract should breakout of ₹755 to improve the chances of a rally.

Given the above factors, traders can stay on the fence now and initiate fresh long positions if the contract breaks out of ₹755. Consider January expiry as the current expiry has limited number of sessions left. That is, buy copper January futures on the break of ₹755 and place initial stop-loss at ₹735. Exit the shorts at ₹795. Shift the stop-loss to ₹755 when the contract rallies past ₹775.