The June futures contract of nickel on the Multi Commodity Exchange (MCX) which had been oscillating in the range of ₹900 to ₹960 since mid-April, broke out of the range on Tuesday. This has opened the door for further strengthening. Notably, the contract has closed with gains in the last three trading sessions, with the price now ruling well above the 21-DMA, an indication of the strengthening of the upward momentum.

As the price has rallied, the daily relative strength index (RSI) has moved up and now lies above the midpoint level of 50. The moving average convergence divergence (MACD) indicator on the daily chart has begun to take the upward trajectory. It is already in the bullish territory, making the case stronger for bulls.

On the back of the prevailing bullish bias, the contract is more likely to appreciate from the current levels. On the upside, the contract might rally to ₹1,000, which can be a strong hurdle. A breakout of that level can take the price to ₹1,025. But if the contract weakens, it might find support at ₹935 — its 21-DMA. Subsequent support is at ₹900 and a break below this level can trigger a substantial sell-off. Hence, it is imperative that the contract remains above ₹900 to retain the bullish bias.

On the global front, the three-month rolling forward contract of nickel on the LME, which was trading in a tight range last week, has resumed its upmove. The contract, currently hovers at $12,750 and is well above the critical level of $12,340. Until the price is above that level, the contract can be bullish.

Trading strategy

The metal looks set to rally as indicated by the upward bias in the respective contracts on the MCX and the LME. Moreover, the MCX-Nickel has breached a crucial resistance. So, traders can buy the contract on declines with stop-loss at ₹900.

Note: The recommendations are based on technical analysis. There is a risk of loss in trading.

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