The continuous contract of lead on the Multi Commodity Exchange (MCX) has been witnessing considerable volatility since the beginning of 2021.
It rallied until the final week of February, wherein it hit a high of ₹181.3. However, the contractmade a U-turn and started to head southwards. It again went up after taking support of ₹158 in mid-March. Once again ₹181 acted as a hurdle and consequently, the futures price moderated. Nevertheless, considering the price action of the past month, the contract has been moving in a tight range between ₹170 and ₹173.
Although the next leg of trend will remain uncertain as long as the contract remain sideways, there are certain indications that denote bearish inclination – the relative strength index has slipped below the mid-point level of 50 and the moving average convergence divergence indicator on the daily chart has been tracing a downward trajectory and is on the verge of entering the bearish territory.
Besides, the average directional index indicates that the bears are currently stronger than bulls and the price is below the 21-day moving average. Even as the contract shows negative bias, it has a base at ₹170, where the 50-DMA coincides. Given the above factors, traders can wait for now and initiate fresh short positions if the contract breaches the support at ₹170. While the stop-loss can be at ₹174, the contract is likely to decline to ₹164 and then possibly to ₹160.