The continuous futures of lead on the MCX (Multi Commodity Exchange) which bounced off the support at ₹166 nearly three weeks ago has largely been moving in a sideways range for the past two weeks, fluctuating between ₹176 and ₹180.
Although the broader trend appears bearish, there are chances for the contract to rally to ₹184 before resuming the downswing. The lead futures could then retest the ₹166 level. A break below this can take the contract lower to ₹157. There might be a bounce off this level because the 50 per cent Fibonacci retracement level of the prior rally lies there.
Therefore, one can consider initiating fresh shorts on lead futures at the current level and adding more shorts when the contract rallies to ₹184. Place stop-loss at ₹192. When the contract moves according to our expectation and falls below ₹166, modify the stop-loss to ₹182. Exit all your shorts at ₹157 because this is an important support against which the contract might witness a rebound.
But note that if the contract rallies above ₹184, it can turn the trend bullish. A move above ₹184 could also mean that a falling trendline resistance would have been taken out, making the case stronger for the bulls. Above ₹184, the resistances are at ₹195 and ₹200.