The copper futures, which saw a corrective rally between mid-July and mid-August, resumed the downtrend after facing the resistance band of ₹680-700 in the second week of August. Since then, it has been forming lower highs and lower lows, tracing a falling channel.
There was a good short build-up between September 9 and September 23 as the cumulative Open Interest (OI) of copper futures increased from 5,760 contracts to 7,409 contracts as the price fell from ₹655 to ₹630. Nevertheless, the contract saw an appreciation in price last week and parallelly, the cumulative OI came down to 5,456 contracts last Friday.
However, it is not an indication of a bullish trend reversal as the contract is likely to meet the upper end of the falling channel at around ₹660 — a resistance. The 50-day moving average is at ₹650, another barrier that could block the recovery.
The above factors indicate that the contract could begin the downtrend between the current level of ₹643 and ₹660. Yet, there could be a pause before that.
Trade strategy
We have been recommending shorts over the past month at various price points between ₹640 and ₹675 with a stop-loss at ₹715. Traders who hold these positions can continue to hold. But modify the stop-loss to ₹685 now.
Bring the stop-loss further down to ₹670 when the contract slips below the support of ₹600. Tighten it further to ₹615 when the contract touches ₹585. Exit the shorts at ₹550. Fresh shorts can also be initiated at the current level with above-mentioned stop-loss and target levels.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.