Copper futures (continuous contract), which broke out of a resistance at ₹760 a couple of weeks back, marked a high of ₹801.5 on Wednesday before closing the session at ₹792.8. The chart shows that the uptrend is intact.
However, it should be noted that ₹800 is a strong hurdle, and of late, there has been a drop in participants interest. The cumulative Open Interest (OI) dropped to 5,274 contracts on January 25 compared with 6,943 contracts on January 13.
On the back of the resistance at ₹800, we might see a corrective decline, possibly to ₹760. The contract could resume the rally after retesting ₹760. But if this level is breached, the short-term outlook will turn bearish where the price could drop to ₹720 quickly.
That said, if the contract breaks out of ₹800 from the current level, we can see a swift rally to ₹825, a resistance level. Subsequent resistance is at ₹850.
Read also: Copper demand exceeds pre-Covid levels, up 27.5% in FY22
Trade strategy
Given the current conditions, we suggest staying out for now. Go long if the contract breaks out of ₹800. Place stop-loss at ₹785 and book profits on a rally to ₹825.