The January futures contract of lead on the Multi Commodity Exchange (MCX) started the previous leg of its rally from about ₹140 in late October. Last month, it reversed direction after marking a high of ₹164, from where it dropped to ₹155. This level acted as a good support and limited the downswing.

While bulls attempted to lift the contract last week, they were unable to do so. But this week, the price began rising with good volumes and on Wednesday, the contract broke out of the prior high of ₹164, opening the door for a further strengthening.

If the uptrend can be sustained, it is likely to lift the contract to ₹172. Above that level, it can rally to ₹175. But if the contract weakens and invalidates the break-out, it can decline to ₹160, which can be a good support. A breach of this level can further drag the contract down to ₹155 – a crucial base.

Nevertheless, there are substantiating factors for a positive view. The daily relative strength index is above the midpoint level of 50 and shows a fresh uptick. The moving average convergence divergence indicator on the daily chart is exhibiting signs of positive momentum. The price has moved above both the 21- and 50-day moving averages and the breakout volume is significant.

Also, the price pattern of the three-month rolling forward contract of lead on the London Metal Exchange (LME) is giving positive cues. It has rebounded from the support of $1,970 and crossed the $2,000-mark this week.

Consequently, traders can take a bullish view and go long in MCX-Lead futures with stop-loss at ₹158.

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