Copper futures on the MCX (Multi Commodity Exchange), met with resistance at ₹840 last week, and has been on a fall since then. On Monday, it slipped below the key support band of ₹790-800 and the contract is currently trading at around ₹790 (May futures). The breakdown has turned the short-term trend negative and thus, we could see further fall from here. Nearest support is at ₹758 below which the price area between ₹720-730 is a good base.
Supporting the bearish bias, indicators like the RSI and the MACD are showing bearish signal. Moreover, the cumulative open interest (OI) of copper futures on the MCX has gone up marginally to 4,075 contracts on Wednesday compared to 3,887 contracts on April 18. The contract had seen a resistance at ₹840 on April 18 post which prices dropped. So, a fall in price along with an increase in OI indicates fresh short build-up.
But there is a possibility of the contract testing the price level of ₹810, where the 50-day moving average lies, before falling towards ₹720-730 band.
So, traders can go short on copper futures (May expiry) in two legs. That is, one can initiate shorts worth half of the planned amount at the current level of ₹790 and short for the remaining amount when price goes up to ₹810. Place stop-loss at ₹830. When the contract drops to ₹758, book half of the total shorts and revise down the stop-loss to ₹780. Liquidate the remaining when price declines to ₹730.