The November futures of lead on the Multi Commodity Exchange (MCX) has been on a rally since taking support at ₹170 in the final week of September.
However, currently trading at ₹180, the contract is nearing a strong resistance region of ₹182-184. The lead futures have not been able to crack this resistance after several attempts since July and thus, the price region of ₹182-184 remains a strong hurdle. Until these levels are breached, the contract will exhibit a bearish bias.
We forecast that the contract could start falling from the current level of ₹180 or after inching up to the price band of ₹182-184. On the downside, it is likely to depreciate to ₹175, a support level. Subsequent support is at ₹173.
Trade strategy
Since the probability of the MCX-lead futures falling from the current level is high, traders can initiate fresh short positions. That is, one can short now at around ₹180 and add more shorts if price moves up to ₹182. Place initial stop-loss at ₹185.
When the contract touches ₹175, book three-fourth of the shorts and then tighten the stop-loss to ₹177. Book the remaining positions when price dips to ₹173.