Commodity Calls

MCX-Lead may resume the rally

Akhil Nallamuthu, BL Research Bureau | Updated on July 20, 2020

MCX-Lead (₹146.8)

The July futures contract of lead on Multi Commodity Exchange (MCX) took support of the 21-day moving average (DMA) at around ₹142 in early July and has been moving upwards. Extending the uptrend, the contract made a high of ₹149.1 last week and slightly moderated to the current level of ₹147. Yet, the price stays above the 21-DMA and so the trend remains bullish.

However, there are certain indications from the Relative Strength Index and the Moving Average Convergence Divergence (MACD) indicators on the daily chart that exhibits weakness. Both the indicators are showing negative divergences - a bearish indication. Also, the MACD, which lies in the positive territory, is turning its trajectory downwards. However, from the medium-term perspective, the contract have good chance to turn the tide in its favour until is sustains above ₹142. Moreover, the price action is yet to form a lower low. In fact, it registered a higher high last week.

If the contract regains momentum and resumes the rally, it is likely to face a hurdle at ₹149. A breakout of that level can take the contract to ₹153. But if the bulls lose ground and price slips below ₹145 i.e. the 21-DMA, it might decline to ₹142. A breach of this support level can turn the short-term trend downside where the price could fall to ₹139.

A price pattern similar to the MCX contract can be seen in the global price movement as indicated by the three-month rolling forward contract of lead on London Metal Exchange (LME). The contract has moderated after a considerable rally. Nevertheless, it sustains above the support of $1,800 meaning the trend remains bullish.

 

 

Trade strategy:

The trend of MCX-Lead continues to be bullish, which is substantiated by the global trend of the metal. Hence, traders can go long in the contract. But since there are signs of weakness, maintain a tight stop-loss.

Published on July 20, 2020

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