Lead futures’ downtrend began in May last year after it faced a barrier at ₹194-196 price band. The latest leg of fall started in early December where the near month expiry (January contract) dropped from ₹184. It closed at ₹177.70 on January 17.
But since the beginning of this month, lead futures shed the downward bias. While there hasn’t been a bullish reversal yet, the contract has been charting a sideways trend between ₹176 and ₹178.50.
The long-term chart of lead futures show that the price band of ₹173.50-176 is a strong support and has stayed valid since June 2021. Also, the contract has been oscillating between the above-mentioned support band and ₹196 since June 2021.
Now that lead futures is trading near the lower boundary of the range, the likelihood of a recovery is high. Gradually, the contract is likely to move up towards the top of the range at ₹196, providing traders an opportunity to execute positional longs.
Trading strategy
On January 1, we recommended buying lead futures at ₹176 with a stop-loss at ₹172. Hold on this trade.
Fresh traders can also be considered now, with a stop-loss at ₹172, as the price has not moved much since the start of this month.
When the contract reaches ₹184 revise the stop-loss to ₹180. Book profits at ₹194.