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Lead futures on the Multi Commodity Exchange (MCX), which saw a price decline towards the end of August to mark a one-month low of ₹174.2, has now recovered to ₹180.
Notably, the price band of ₹180-182 is a resistance region and a rally beyond this level is less likely.
Even if there is a rally from the current levels, it will be restricted to ₹185 as it is a strong barrier where a falling trendline resistance coincide.
A decisive breach of ₹185 can turn the trend bullish with the resistance band seen in the ₹192-195 range.
Nevertheless, we hold a bearish view at this juncture, and forecast the MCX lead futures to fall from the current level of ₹180 or ₹185.
The decline can drag the contract to the prior low of ₹166 recorded in mid-July. This is a good support against which the contract can see a rebound. Subsequent support is at ₹158.
Strategy
Considering these factors, we suggest initiating fresh shorts at the current level. Short more if the lead future contract rallies to ₹185. Place stop-loss at ₹188.
Tighten the stop-loss to ₹180 when the contract falls below ₹172. When the price touches ₹166, book three-fourth of the total shorts that you hold and then modify the stop-loss to ₹172. Liquidate the remaining shorts when the contract touches ₹158.
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