The continuous futures contract of lead on the Multi Commodity Exchange (MCX) has been an uptrend since last June and consequent to this, it hit a fresh one-year high of ₹181.3 in the final week of February. But then the trend reversed and the contract began moving downwards where it lost about 13 per cent in a couple of weeks’ time and marked a low of ₹157.2. Since this low offered good support, the decline was stemmed. Since mid-March the contract has been appreciating steadily and, therefore, it seemed to be aligning with the major uptrend.

The price has crossed over both 21- and 50-day moving averages (DMAs) and looks set to gain further. Substantiating the positive bias, the daily relative strength index has been gaining in line with the price and the moving average convergence divergence indicator on the daily chart is tracing an upward trajectory and is well inside the bullish zone. Also, the rally is accompanied by an increase in open interest which is a bullish indication.

Considering the above factors, one can be positive and initiate fresh long positions in lead futures. Traders can consider buying May expiry rather than the current expiry. So, buy with stop-loss at ₹164, where the 21-DMA coincides. This is a strong base and until the price lies above this level, the near-term trend will stay bullish. On the upside, the contract is likely to rally towards ₹175 and then possibly to ₹180.

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