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The December futures contract of lead on Multi Commodity Exchange (MCX), which saw a fresh breakout of ₹160 in the last week of November, failed to build on to the momentum. After registering a high of ₹165.1 last week, the contract has been on a decline. But until it stays above the support band of ₹157 and ₹160, the decline cannot be counted as a trend reversal where it could only be a correction.
Moreover, the contract remains above the 21-day moving average, which coincide at the support of ₹157, making it a strong base. Supporting this point, the contract bounced sharply off the support at ₹157 on Monday and posted an intra-day gain of 2.2 per cent as it ended at ₹161.5. The rebound is hinting at a renewed upward momentum. If the contract can regain traction and appreciate, it can retest the prior high at around ₹165. A breakout of this level can lift if towards ₹170.
However, the relative strength index and the moving average convergence divergence indicators on the daily chart, though staying in their respective bullish zone, is exhibiting some kind of weakness. On the back of this, if the contract breaks below the support at ₹157, the short-term trend turn bearish. Supports below ₹157 can be spotted at ₹153 and ₹150.
Despite the recent correction, the overall trend remains bullish and the price bounce on Monday hints are the rally regaining momentum. So, traders can buy the contract on dips with stop-loss at ₹157.
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