Commodity Calls

MCX-Nickel likely to decline further

Akhil Nallamuthu BL Research Bureau | Updated on December 04, 2019

The Nickel extended its downtrend as the spot price on the MCX tumbled during the past week. Likewise, the December futures contract of Nickel has also declined during the period. While the current spot market price of nickel is at ₹1,008, the December futures contract of nickel is trading at ₹985, below the critical support of ₹1,000.

Notably, the futures price is trading at a discount compared to the spot price, corroborating the bearish outlook of the metal. Thus, the downtrend looks intact and now that the contract has breached the important support, further depreciation is likely.

However, there are factors that can be of concern for the bears. By plotting the RSI on the daily chart, we can observe that the index is at over-sold levels and the MACD indicator hints at a loss of bearish momentum, even though the contract price continues to fall.

If the contract continues to weaken, it will find support at ₹963. Below that level, support is at ₹930. On the other hand, if the price moves up on short-covering, it will face a hurdle at ₹1,000; beyond that level, resistance is at ₹1,050.

Like on the MCX, the price of the three-month rolling forward contract of Nickel on the London Metal Exchange seems to be under pressure as the price broke below the important support of $13,930. The current market price of $13,375 is a support. In case this level is broken, the contract has support at $12,845. But if it appreciates, it will face resistance at $13,930.

Trading strategy

Nickel is in a strong downtrend and there are no signs of reversal yet. However, the spot price on the MCX is trading near a support. So, instead of selling the contract right away, traders are recommended to wait for a minor rally and then initiate fresh short positions with ₹1,050 as stop-loss.

Published on December 05, 2019

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