The continuous contract of copper on the Multi Commodity Exchange (MCX), which hit a low of ₹738.1 a couple of weeks before, has been on a recovery. It is currently trading around ₹786, near a resistance level. Significantly, the falling trendline and the 50 per cent Fibonacci retracement level of the previous downswing coincide at this resistance. Therefore, a rally beyond this level is less likely.
We expect the contract to resume the downtrend anywhere between the current level of ₹786 and the hurdle at ₹790. While ₹770 can be a minor support, the contract will most likely slip to ₹760. A breach of this level can see the contract declining to ₹738, its prior low.
Given the above conditions, one can consider initiating fresh short positions at the current level. Place initial stop-loss at ₹805. When the contract drops below ₹770, tighten the stop-loss to ₹785. Likewise, when it falls below ₹760, tighten the stop-loss further to ₹775. Exit all the shorts when the contract touches ₹738. There can be a bounce off this level since this is a strong support.
Note that a clear breach of ₹800 can induce some positivity, where the contract could rally to ₹825.