The March futures contract of lead on the Multi Commodity Exchange (MCX) has been on a donwtrend since the past three weeks and the decline is likely to continue.
However, the contract has its nearest support at ₹156. So, traders can consider initiating fresh short positions if the support at ₹156 is nullified.
The contract, which was oscillating between ₹156 and ₹166 from December 2020 to mid-February, breached the upper limit of the range and rallied to mark a high of ₹174.7 by the end of last month. But then, it took a sharp U-turn and has been descending since then. The bears have dragged the contract into the earlier price range of ₹156 and ₹166. In fact, it is now testing the support at ₹156.
Nevertheless, the contract is exhibiting bearish bias which is substantiated by the relative strength index (RSI) and the moving average convergence divergence (MACD) indicators on the daily chart. That is, both these indicators have slipped into their negative territories.
On the back of this, if the contract breaks below ₹156, it is likely to drop to ₹150. Below this level, the support is at ₹146. So, traders can short MCX-lead with stop-loss at ₹160 if it breaches the support at ₹156.