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Copper futures, after ending 2020 with huge gains, initially extended the rally in early January but started to moderate before a couple of weeks. That is, the February futures marked a high of ₹629.7 and is currently trading around ₹610. Looking at the recent price action, the contract seems to be in a sideways trend, oscillating between ₹605 and ₹620.
As the price has been consolidating of late, the contract has started to show signs of the bulls losing traction. The daily relative strength index (RSI) has been drifting lower and the moving average convergence divergence (MACD) on the daily chart has been tracing a downward trajectory. However, these are not signs of outright trend reversal and notably, both these indicators remain in their respective bullish territory. Also, the price continues to trade above the key support band of ₹595 and ₹600. At these levels, the 50-day moving average (DMA) coincide, making it a strong support. So, despite indications of weakness, the bias will be bullish until the price stays above the aforementioned price band.
However, given the prevailing price action, rather than going long at current level, traders can wait for signs of momentum improving. One can consider initiating longs if the contract breaks out of ₹620, a resistance level. Stop-loss can be at ₹610. If breakout occurs, it can potentially rally past ₹630 and head towards ₹640. Notable support below ₹595 can be spotted at ₹583.
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