After facing a sharp fall between March and mid-July this year, the continuous futures of copper on the Multi Commodity Exchange (MCX) started to recover after marking a low of ₹602.15. That is, the contract has been on a recovery since the past month and is currently trading at around ₹665.
Although the price has been moving up, the overall bias remains bearish and we expect the upside to be limited. The contract might reverse from either ₹670 or ₹700 and resume the downtrend. In that case, the price could slip below the support at ₹600 and decline towards the support band of ₹530-550. A fall below this is less likely.
On the other hand, if the contract manages to rally past ₹700, it might turn the trend bullish, wherein the price could rise to ₹740.
That said, the resistance at ₹700 holds true as of now and the trend remains bearish. Therefore, one can consider executing fresh short positions. But it can be implemented in two legs as below.
Short copper futures when price touches ₹670. Add more shorts if it rallies further to ₹700, and place an initial stop-loss at ₹745. When the contract reverses to the downside, as we expected, and dips below ₹600, revise the stop-loss down to ₹670. Liquidate all the shorts when the contract touches ₹550.