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The continuous contract of lead on the Multi Commodity Exchange (MCX) has been on an uptrend since May 2020. But the bulls lost traction in September 2021 after reaching ₹195. Since then, although there has been no bearish reversal, the contract has largely been trading in a sideways trend. That is, it is fluctuating between ₹180 and ₹195. Nevertheless, it is worth noting that ₹180 is a strong support and it has been preventing decline below this level for over six months. So, as long as the contract remains above this level, the trend will be bullish biased.
In recent weeks, the futures has seen a decline but managed to stay within the broad range of ₹180-195. Currently trading at around ₹180, the contract could see a rally from here and retest the range top of ₹195. So, even though the next leg of trend can be assumed only if either ₹180 or ₹195 is breached, one can consider fresh longs because the horizontal trend is expected to stay for a while and the risk-reward ratio favours the longs at current levels.
Therefore, traders can initiate fresh longs at current levels with stop-loss at ₹175. Exit the longs when price hits ₹195. Stick to the stop-loss strictly because a breach of the support at ₹180 can turn the outlook negative. Below ₹180 the contract can decline to ₹173 initially and then possibly to ₹168, which is a strong support level.
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