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Copper futures on the Multi Commodity Exchange (MCX) have been on a recovery for the past couple of weeks. The continuous futures contract of the red metal in the domestic exchange took support at ₹700 and bounced. It is currently trading around ₹720.
Going ahead, the recovery may not be easy as copper futures face a strong barrier between ₹725 and ₹730. Unless this level is breached, it would be premature to call the latest rally as bullish trend reversal.
If the contract breaks out of the hurdle at ₹730, it can turn the short-term trend bullish and we could see a swift rally to ₹750, a resistance. Above this level, ₹780 is the immediate barrier.
On the other hand, if copper futures fall from the current level of ₹720, it will certainly find support at ₹700. But if this level is taken out, we are likely to see another downswing, which can potentially drag the contract to ₹660.
Trade strategy
Given the above conditions, ideally, one should wait for the contract to decisively breach the resistance at ₹730 before going long. In such a case, target and stop-loss can be at ₹750 and ₹738.
Yet, traders with a higher risk appetite can consider selling copper futures now at ₹720 on the back of the resistance at ₹730. Keep stop-loss at ₹732 and look for a target of ₹700.
But remember that once the stop-loss of the short position is hit, it means the resistance at ₹730 would have been taken out. So, in such a case, consider longs with stop-loss and target as mentioned above.
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