Commodity Calls

Corrective rally gains momentum in MCX-Nickel

Gurumurthy K, BL Research Bureau | Updated on January 16, 2019

The Nickel futures contract on the Multi Commodity Exchange of India (MCX) has begun the new year 2019 on a positive note. The contract has been on a strong rally since the beginning of the year. The MCX-Nickel futures contract made a low of ₹735.2 per kg on January 1 and has been moving consistently higher from there. The contract has surged 13 per cent from the low and is currently trading at ₹832 per kg.

The strong rally since the beginning of this month has taken the contract well above the key resistance levels of ₹790 and ₹810. Additionally, this upward reversal has happened from a key trend-line as well as the 200-week moving average support. So, does this mark the end of the downtrend that was in place since June 2018? We will have to wait and see. The price action in the coming weeks will need a close watch to decide whether this is a trend reversal or just a corrective rally.

The short-term outlook remains positive. The region between ₹810-₹800 will now act as a strong support and limit the downside. An upmove to the next resistance at ₹845 – the 21-week moving average, is likely in the near term. Inability to breach this hurdle can trigger an intermediate pull-back move to ₹820 or ₹810. But the downside is likely to be limited as fresh buyers are likely to emerge in the market at lower levels. As such, an eventual break above ₹845 will then increase the likelihood of the contract targeting ₹870 over the short term.

The bullish outlook will get negated only if the contract declines below ₹790. The next targets are ₹750 and ₹730. But such a sharp fall breaking below ₹790 looks unlikely at the moment.

Trading strategy

High risk appetite traders with a short-term perspective can make use of dips to go long at ₹825 and ₹815. Stop-loss can be placed at ₹795 for the target of ₹870. Revise the stop-loss to ₹835 as soon as the contract moves up to ₹855.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

Published on January 16, 2019

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like